By Knut Aas-Jakobsen, Mathis Grenacher (auth.)

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If firms set minimum recruitment standards better trained workers can be expected to encounter more frequent job offers which reduces unemployment duration ceteris paribus. Why is there wage rigidity leading to unemployed workers not being able to underbid going wage rates? This question is the topic of various theories. One branch of these approaches explains wage rigidity formally by the agents l optimizing behavior. It comprises theories on implicit contracts and contracts under asymmetric information, efficiency wages, adverse selection and insider-outsider wage setting.

Consider now the construction of a competing risks model in detail. Expositions of the model can be found, for example, in Kalbfleisch and Prentice (1980), Lawless (1982), Cox and Oakes (1985), and Blossfeld, Hamerle and Mayer (1986). Let k = 1, ... , K index K different exit states, and let Z be a random variable which takes on the value k if transition occurs into state k. 9) hiy Ix(y)] = lim pr{y 5-'0 < Y < y+s, Z=k IY>y, x(y)}/s, which now denotes the conditional exit rate from unemployment at duration y into state k given that no exit from unemployment occurred prior to y.

00 Thus, for y+ .. 12) yields the probability pr(Z = k , {x(t)}t=O) that exit from unemployment occurs into state k. 13) L(;\'") = II n i=1 {II K k=1 k h (Yi '{x(t)} y. 1 ~k ;;\'") 1 t=O }'S(Yi' {x(t)} y. 1 ;;\'"). t=O The index ~k now indicates for each individual in the sample the censoring state as well as the exit state if the spell is uncensored: I' k = { 1 1 if Yj < mi • and exit occurs into state k 0 else • and ;\'" again denotes the parameter vector to be estimated. 14) y. K k y. 16) k k L ( ...

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