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Scarring Effects of Remaining Unemployed for Long-Term Unemployed School-Leavers

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  • Bart Cockx
  • Matteo Picchio

Abstract

This study investigates whether and to what extent further unemployment experience for youths who are already long-term unemployed imposes a penalty on subsequent labor market outcomes. We propose a flexible method for analyzing the effect on wages aside of transitions from unemployment and employment within a multivariate duration model that controls for selection on observables and unobservables. We find that prolonging unemployment drastically decreases the chances of finding employment, but hardly affects the quality of subsequent employment. The analysis suggests that negative duration dependence in the job finding rate is induced by negative signaling and not by human capital depreciation.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3565.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3565

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Keywords: scarring effect of unemployment duration; employment quality; wage in multivariate duration model; selectivity;

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Citations

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Cited by:
  1. Görlich, Dennis & Stepanok, Ignat & Al-Hussami, Fares, 2013. "Youth unemployment in Europe and the world: Causes, consequences and solutions," Kiel Policy Brief 59, Kiel Institute for the World Economy (IfW).
  2. Jahn, Elke J. & Rosholm, Michael, 2014. "Looking beyond the bridge: The effect of temporary agency employment on labor market outcomes," European Economic Review, Elsevier, vol. 65(C), pages 108-125.
  3. Matteo PICCHIO, 2011. "Lagged Duration Dependence in Mixed Proportional Hazard Models," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011037, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  4. O'Higgins, Niall, 2012. "This Time It's Different? Youth Labour Markets During 'The Great Recession'," IZA Discussion Papers 6434, Institute for the Study of Labor (IZA).
  5. Cockx, Bart, 2013. "Youth Unemployment in Belgium: Diagnosis and Key Remedies," IZA Policy Papers 66, Institute for the Study of Labor (IZA).

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