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Employment Risk over the Life Cycle

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  • Carolina Fugazza
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    Abstract

    In this paper we focus on the relative role of job finding and job exit in shaping the employment risk over the life cycle. Using Italian labor market data we document that the risk of being fired and the chance of reemployment display substantial heterogeneity depending on age, cohort and occupational characteristics. We show how the two risk combine in shaping the employment risk. Our results evidence that the life cycle employment probability profile is hump shaped with a peak at adult age and that this dynamic is mainly driven by the “U” –age profile of transitions from employment to unemployment. Moreover, we find that differences in job finding probabilities are mainly responsible for the heterogeneity in the employment risk across working groups.

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    File URL: http://www.carloalberto.org/assets/working-papers/no.280.pdf
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    Bibliographic Info

    Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 280.

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    Length: 24 pages
    Date of creation: 2012
    Date of revision:
    Handle: RePEc:cca:wpaper:280

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    Keywords: Employment risk; Duration; Heterogeneity; Semi-Markov Process;

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    1. Matt Jackson, 2003. "The Effects of Social Networks on Employment and Inequality," Theory workshop papers 658612000000000032, UCLA Department of Economics.
    2. Berg, G.J. van den, 1987. "Nonstationarity in job search theory," Research Memorandum 242, Tilburg University, Faculty of Economics and Business Administration.
    3. Bover, O. & Arellano, M. & Bentolila, S., 1997. "Unemployment Duration, Benefit Duration, and the Business Cycle," Papers 9717, Centro de Estudios Monetarios Y Financieros-.
    4. Alexandru Voicu, 2002. "Employment Dynamics in the Romanian Labor Market. A Markov Chain Monte Carlo Approach," Computing in Economics and Finance 2002 349, Society for Computational Economics.
    5. Gabriella Berloffa & Peter Simmons, 1999. "Unemployment risk, labour force participation and savings," Department of Economics Working Papers 9902, Department of Economics, University of Trento, Italia.
    6. Barbara Petrongolo, 1998. "Re-employment Probabilities and Returns to Matching," CEP Discussion Papers dp0406, Centre for Economic Performance, LSE.
    7. Lynch, Lisa M, 1989. "The Youth Labor Market in the Eighties: Determinants of Re-employment Probabilities for Young Men and Women," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 37-45, February.
    8. Vishwanath, Tara, 1989. "Job Search, Stigma Effect, and Escape Rate from Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 487-502, October.
    9. Christopher D. Carroll & Karen E. Dynan & Spencer D. Krane, 2003. "Unemployment Risk and Precautionary Wealth: Evidence from Households' Balance Sheets," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 586-604, August.
    10. Gregg, Paul, 2001. "The Impact of Youth Unemployment on Adult Unemployment in the NCDS," Economic Journal, Royal Economic Society, vol. 111(475), pages F626-53, November.
    11. Pissarides, Christopher A, 1992. "Loss of Skill during Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1371-91, November.
    12. Hall, Robert E., 1979. "A theory of the natural unemployment rate and the duration of employment," Journal of Monetary Economics, Elsevier, vol. 5(2), pages 153-169, April.
    13. Stuart O. Schweitzer & Ralph E. Smith, 1974. "The persistence of the discouraged worker effect," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 27(2), pages 249-260, January.
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