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Economic Conditions and Employment Dynamics of Immigrants versus Natives: Who Pays the Costs of the "Great Recession"?

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  • Raquel Carrasco
  • J. Ignacio García Pérez

Abstract

This paper studies how unemployment and employment durations for immigrants and natives respond differently to changes in the economic conditions due to the 2008 crisis and to the receipt of unemployment benefits when the economy declines. Using administrative data for Spain, we estimate multi-state multi-spell duration models that disentangle unobserved heterogeneity from true duration dependence. Our findings suggest that immigrants are more sensitive to changes in economic conditions, both in terms of unemployment and employment hazards. Moreover, the effect of the business cycle is not constant but decreases with duration at a higher rate among immigrants. The results also point to a disincentive effect of unemployment benefits on unemployment duration, which is stronger for immigrants but only at the beginning of the unemployment spell and mainly during good times (before the 2008 recession). Finally, we find evidence of a positive effect of unemployment benefits on subsequent employment duration, but only for native workers with temporary contracts. Nonetheless, this effect vanishes as workers qualify again for unemployment benefits.

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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we1232.

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Date of creation: Nov 2012
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Handle: RePEc:cte:werepe:we1232

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Keywords: Duration models; Multiple spells; Unobserved heterogeneity; Unemployment benefits; Economic cycle; Immigration;

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  1. Abbring, Jaap H. & van den Berg, Gerard J. & van Ours, Jan C., 2002. "The anatomy of unemployment dynamics," European Economic Review, Elsevier, vol. 46(10), pages 1785-1824, December.
  2. Michael Baker & Angelo Melino, 1999. "Duration Dependence and Nonparametric Heterogeneity: A Monte Carlo Study," Working Papers melino-99-01, University of Toronto, Department of Economics.
  3. Jorgen Hansen & Magnus Lofstrom, 2003. "Immigrant Assimilation and Welfare Participation Do Immigrants Assimilate Into or Out of Welfare?," Journal of Human Resources, University of Wisconsin Press, vol. 38(1).
  4. Borjas, George J & Hilton, Lynette, 1996. "Immigration and the Welfare State: Immigrant Participation in Means-Tested Entitlement Programs," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 575-604, May.
  5. Honore, Bo E, 1993. "Identification Results for Duration Models with Multiple Spells," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 241-46, January.
  6. Jenkins, Stephen P, 1995. "Easy Estimation Methods for Discrete-Time Duration Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 129-38, February.
  7. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  8. Stéphane Bonhomme & Laura Hospido, 2012. "The cycle of earnings inequality: evidence from Spanish social security data," Banco de Espa�a Working Papers 1225, Banco de Espa�a.
  9. Christian Dustmann & Albrecht Glitz & Thorsten Vogel, 2006. "Employment, Wages, and the Economic Cycle: Differences between Immigrants and Natives," CReAM Discussion Paper Series 0609, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
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  13. Barth, Erling & Bratsberg, Bernt & Raaum, Oddbjørn, 2003. "Local Unemployment and the Relative Wages of Immigrants: Evidence from the Current Population Surveys," Memorandum 20/2002, Oslo University, Department of Economics.
  14. Núria Rodríguez-Planas, 2013. "Determinants of immigrants’ cash-welfare benefits intake in Spain," International Journal of Manpower, Emerald Group Publishing, vol. 34(2), pages 167-180, February.
  15. Yolanda Rebollo Sanz, 2010. "Unemployment Insurance and Job Turnover in Spain," Working Papers 10.08, Universidad Pablo de Olavide, Department of Economics, revised Nov 2011.
  16. Michael Baker & Dwayne Benjamin, 1995. "The Receipt of Transfer Payments by Immigrants to Canada," Journal of Human Resources, University of Wisconsin Press, vol. 30(4), pages 650-676.
  17. Uhlendorff, Arne & Zimmermann, Klaus F, 2006. "Unemployment Dynamics among Migrants and Natives," CEPR Discussion Papers 5872, C.E.P.R. Discussion Papers.
  18. Huh, Keun & Sickles, Robin C, 1994. "Estimation of the Duration Model by Nonparametric Maximum Likelihood, Maximum Penalized Likelihood, and Probability Simulators," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 683-94, November.
  19. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  20. Adriaan Kalwij, 2010. "Unemployment durations and the pattern of duration dependence over the business cycle of British males," Empirical Economics, Springer, vol. 38(2), pages 429-456, April.
  21. Christian Belzil, 2001. "Unemployment insurance and subsequent job duration: job matching versus unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(5), pages 619-636.
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