Transitions in the Danish Labour Market: A Regional Analysis

This paper analyses the transitions from unemployment into employment and out-of-labour force using a mixed proportional hazard framework. The regional differences in the transition intensities, individual effects and discouragement probability are investigated using Danish registry data for 1985-1998. The transition intensity from unemployment into employment is decreasing and the intensity into inactivity is U-shaped in all the counties. The discouragement probability is increasing in elapsed time. It increased during the economic downturn at the end of 1980’s, but did not decrease when a new growth period began in the middle of 1990’s. The high discouragement rate seems to be related with long unemployment duration but not with a high unemployment rate. Composition effect explains roughly 15-30% of regional variability.