Unemployment: blame the victim?

Abstract

This paper investigates a problem of 'state dependency'. People who have been unemployed in the past are much more likely than others to become unemployed in the future. But is it unemployment itself that causes future unemployment or is there something else, some measured or unmeasured form of heterogeneity, in individual characteristics or environmental circumstances, that causes both the past and present unemployment? There is an extensive economic literature on this issue which comes to no absolutely firm conclusions as to the existence of state dependency in this case. We present a simple sociological model, of the 'recursive determination' of the employment state. We estimate that time invariant personal characteristics not included in the model (or left altogether unmeasured) can only play a small part in the determination of unemployment. Which implies in turn that the association between successive periods of unemployment must be mostly the result of acquired or other time-varying characteristics (though we cannot tell whether these relate to the individual or to circumstances in his or her social or geographical environment).