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Modelling the Short-Term Dynamics of Unemployment Using the ABS Longitudinal Labour Force Survey File

The Analytical Services Unit is currently undertaking an analysis using the newly constructed ABS Longitudinal Labour Force Survey (LLFS) file. The focus is on examining the transition from unemployment for Australians aged 20 years or older, over a period of three years, from the beginning of 2008 to the end of 2010. By including more than 1.8 million records from around 150,000 households observed over a period of up to eight consecutive months, the file is well suited for analysing short-term labour market dynamics.

The analysis is divided into two parts. The first is focused on non-parametric techniques to examine the number of periods spent in unemployment and includes raw hazard and survival functions, as well as life tables. The second part builds on the first and examines the transitions from unemployment using a discrete duration modelling approach. To account for the observed as well as unobserved heterogeneity, both the ordinary logit as well as the random effects logit models are implemented. As there are different exit states, the analysis applies the competing-risks framework to separately examine the transition from unemployment into the four exit states: any type of employment (defined as either full-time or part-time), full-time, part-time, or not in the labour force.

Amongst others, the preliminary findings indicate that the longer the unemployment spell, the less likely it is for people to exit to employment, and the less likely it is for them to leave the labour force (contrary to the discouraged job seeker effect). This is an interesting result that warrants further investigation.

Research analysts interested in getting more information about the LLFS can refer to Microdata: Longitudinal Labour Force, Australia, 2008-10 (ABS cat. no. 6602.0).

Further Information
For more information, please contact Cristian Rotaru (02 6252 5098, cristian.rotaru@abs.gov.au)

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