Return to employment, after a period of unemployment, is analyzed for a large sample of Swedish occupationally disabled workers. A piece-wise constant model is used, extended to allow for Gamma heterogeneity. Three competing exits from unemployment are accounted for; regular employment, sheltered/subsidized employment and withdrawal from the labor force. The model is also generalized by accounting for differing search behavior within the population.
The hazard rate is constant or slightly increasing over time, for exit to some kind of employment. However, for exit from unemployment by leaving the labor force, the hazard shows quite strong positive duration dependence. Men tend to be more probable to leave unemployment for regular employment, and less probable than women to leave the labor force. The probability of finding regular employment is smallest for workers with psychological disabilities, while high-school or university education as well as previous professional experience increases the hazard rate for regular employment.
The heterogeneity due to differing search behavior appears to be at least as important as the Gamma heterogeneity. The estimated probabilities of no search for one particular exit varies, across exits and subsamples, between 0.0 and 0.4.