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Employment risk and household formation: evidence from differences in firing costs

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  • Mario García-Ferreira

    ()
    (NERA)

  • Ernesto Villanueva

    ()
    (Banco de España)

Abstract

The rate of new household formation among young adults who live with their parents has decreased in the last twenty years, specially in Southern Europe. At the same time, exposure to the risk that a young adult loses his or her job has increased. We use differences in firing costs across contract types in the Spanish labor market to identify if there is a causal link between both developments. Our first identification strategy exploits a legally-induced sharp increase in firing costs 3 years after the starting of a fixed-term contract between 1987 and 1996. The second uses variation in regional incentives to promote high-firing cost contracts between 1997 and 2001. Both strategies fail to detect a causal impact of job insecurity on the probability of forming a new household. Tentative evidence supports the notion that lower job insecurity has an impact on the form of tenure of the first house of residence, favoring home-ownership over renting.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/07/Fic/dt0737e.pdf
File Function: First version, December 2007
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0737.

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Length: 51 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:bde:wpaper:0737

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Keywords: Job security; household formation;

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References

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  1. Olympia Bover & Ramón Gómez, 2004. "Another look at unemployment duration: exit to a permanent vs. a temporary job," Investigaciones Economicas, Fundación SEPI, Fundación SEPI, vol. 28(2), pages 285-314, May.
  2. Paola Giuliano, 2005. "Living Arrangements in Western Europe: Does Cultural Origin Matter?," 2005 Meeting Papers, Society for Economic Dynamics 189, Society for Economic Dynamics.
  3. Juan José Dolado & Carlos García-Serrano & Juan F. Jimeno, . "Drawing Lessons from the Boom of Temporary Jobs in Spain," Working Papers 2001-11, FEDEA.
  4. Kugler, Adriana & Jimeno, Juan F. & Hernanz, Virginia, 2002. "Employment Consequences of Restrictive Permanent Contracts: Evidence from Spanish Labor Market Reforms," IZA Discussion Papers 657, Institute for the Study of Labor (IZA).
  5. Güell, Maia & Petrongolo, Barbara, 2003. "How Binding are Legal Limits? Transitions from Temporary to Permanent Work in Spain," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3931, C.E.P.R. Discussion Papers.
  6. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, Econometric Society, vol. 69(1), pages 201-09, January.
  7. Steven J. Haider & Kathleen McGarry, 2005. "Recent Trends in Resource Sharing Among the Poor," NBER Working Papers 11612, National Bureau of Economic Research, Inc.
  8. Maria Gutierrez-Domenech, 2002. "The Impact of the Labour Market on the Timing of Marriage and Births in Spain," CEP Discussion Papers, Centre for Economic Performance, LSE dp0556, Centre for Economic Performance, LSE.
  9. Becker, Sascha O. & Bentolila, Samuel & Fernandes, Ana & Ichino, Andrea, 2005. "Job Insecurity and Youth Emancipation: A Theoretical Approach," IZA Discussion Papers 1869, Institute for the Study of Labor (IZA).
  10. Manacorda, Marco & Moretti, Enrico, 2005. "Why Do Most Italian Young Men Live With Their Parents? Intergenerational Transfers and Household Structure," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5116, C.E.P.R. Discussion Papers.
  11. Yolanda F. Rebollo & J. Ignacio Pérez, 2008. "The use of permanent contracts across Spanish regions: Do regional wage subsidies work?," Economic Working Papers at Centro de Estudios Andaluces E2008/09, Centro de Estudios Andaluces.
  12. Wilbert van der Klaauw, 2002. "Estimating the Effect of Financial Aid Offers on College Enrollment: A Regression-Discontinuity Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1249-1287, November.
  13. Fernandes Ana & Becker Sascha O & Bentolila Samuel & Ichino Andrea, 2008. "Income Insecurity and Youth Emancipation: A Theoretical Approach," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 8(1), pages 1-42, July.
  14. Topel, Robert H, 1986. "Local Labor Markets," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(3), pages S111-43, June.
  15. Rosenzweig, Mark R & Wolpin, Kenneth I, 1994. "Parental and Public Transfers to Young Women and Their Children," American Economic Review, American Economic Association, American Economic Association, vol. 84(5), pages 1195-1212, December.
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Cited by:
  1. Fernández-Kranz, Daniel & Lacuesta, Aitor & Rodríguez-Planas, Núria, 2010. "Chutes and Ladders: Dual Tracks and the Motherhood Dip," IZA Discussion Papers 5403, Institute for the Study of Labor (IZA).
  2. Aparicio Fenoll, Ainhoa & Oppedisano, Veruska, 2012. "Fostering the Emancipation of Young People: Evidence from a Spanish Rental Subsidy," IZA Discussion Papers 6651, Institute for the Study of Labor (IZA).
  3. Becker, Sascha O. & Bentolila, Samuel & Fernandes, Ana & Ichino, Andrea, 2005. "Youth Emancipation and Perceived Job Insecurity of Parents and Children," IZA Discussion Papers 1836, Institute for the Study of Labor (IZA).
  4. Daniel Fernández-Kranz & Núria Rodríguez-Planas, 2010. "The Part-Time Pay Penalty in a Segmented Labor Market," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 825.10, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  5. Nollenberger, Natalia & Rodríguez-Planas, Núria, 2011. "Child Care, Maternal Employment and Persistence: A Natural Experiment from Spain," IZA Discussion Papers 5888, Institute for the Study of Labor (IZA).
  6. Ainhoa Herrarte & Julián Moral-Carcedo & Felipe Sáez, 2012. "The impact of childbirth on Spanish women’s decisions to leave the labor market," Review of Economics of the Household, Springer, Springer, vol. 10(3), pages 441-468, September.

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