1 Working Paper 06-62 Business Economics Series 18 October 2006 Sección de Organización de Empresas de Getafe Universidad Carlos III de Madrid Calle Madrid, 126 28903 Getafe (Spain) Fax (34) 91 624 5707 UNEMPLOYMENT DURATION, UNEMPLOYMENT BENEFITS AND RECALLS* Alfonso Alba-Ramírez 1 , José María Arranz Muñoz 2 and Fernando Muñoz-Bullón 3 Abstract We use administrative micro-data to investigate exits from unemployment of benefit recipients in Spain. Because the data allow us to distinguish between transitions to a new job and recall to the same employer, we apply a competing risks model with observed and unobserved heterogeneity. We are also able to control for the type of benefit received by the worker: insurance benefit or assistance benefit. We find significant differences between the new job hazard and the recall hazard. Both hazard rates increase around the time that insurance benefit elapses. We also find that when larger firms recall unemployed workers they tend to do so faster than smaller firms. In general, our results are consistent with predictions derived from search and implicit contract models. They highlight the importance of taking into account the possibility of recall in the analysis of unemployment duration among unemployment benefit recipients. Keywords: unemployment duration, recall hazard, new-job hazard, unobserved heterogeneity, unemployment benefits, competing risks model. Codes: C41, J64 1 Universidad Carlos III de Madrid. Departamento de Economía. C/Madrid, 126. 28903 Getafe (Madrid). SPAIN 2 Universidad de Alcalá, Departamento de Estadística, Estructura y OEI, Plaza de la Victoria 3, 28803 Alcalá de Henares (Madrid). SPAIN. 3 Universidad Carlos III, Sección de Organización de Empresas, C/Madrid 126-Getafe (Madrid), 28903 (Spain); fernando.munoz@ uc3m.es * We would like to thank seminar participants at the European Association of Labour Economics conference 2006 (Praga) for helpful suggestions. We are very grateful to the Spanish Ministry of Labour and Social Affairs for financial support and the data used. Financial support was also provided by the Ministry of Education and Science, project SEC2003-08714. Only the authors are responsible for any errors.