Analysis of the transitional dynamics and duration of unemployment in Costa Rica

Abstract

This paper analyzes the main factors that explain the duration of unemployment spells and the transitional dynamics between the state of employment, unemployment and inactivity in Costa Rican labor market, using the Continuous Employment Survey for the period between the first quarter of 2012 and the third quarter of 2013. This research focuses mainly on supply-side factors and uses binominal and multinomial logit models in order to determine which variables determine that some people are more likely to be unemployed, Markov matrixes to estimate a series of transitional probabilities for different states in the labor market, and a survival model to characterize the duration of the unemployment spells. We conclude that women are more likely to be unemployed than men, and have smaller probabilities of changing from unemployed to employed. Also, the duration of their unemployment spells is longer. Furthermore, a higher academic level decreases the probabilities for an individual of being unemployed, but increases the duration of the unemployment spell. A correlation between the performance of the economic activity and the probabilities of becoming employed and of becoming inactive is observed.