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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. 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.
  2. 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.
  3. Abbring, Jaap H & van den Berg, Gerard J & van Ours, Jan C, 1995. "The Anatomy of Unemployment Dynamics," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1202, C.E.P.R. Discussion Papers.
  4. Barth, Erling & Bratsberg, Bernt & Raaum, Oddbjørn, 2003. "Local Unemployment and the Relative Wages of Immigrants: Evidence from the Current Population Surveys," Memorandum, Oslo University, Department of Economics 20/2002, Oslo University, Department of Economics.
  5. Dustmann, Christian & Glitz, Albrecht & Vogel, Thorsten, 2009. "Employment, Wages, and the Economic Cycle: Differences between Immigrants and Natives," IZA Discussion Papers 4432, Institute for the Study of Labor (IZA).
  6. Juan José Dolado & Carlos García-Serrano & Juan F. Jimeno, . "Drawing Lessons from the Boom of Temporary Jobs in Spain," Working Papers 2001-11, FEDEA.
  7. Hansen, Jörgen & Löfström, Magnus, 2000. "Immigrant Assimilation And Welfare Participation: Do Immigrants Assimilate Into Or Out Of Welfare?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2430, C.E.P.R. Discussion Papers.
  8. Christian Belzil, 2001. "Unemployment insurance and subsequent job duration: job matching versus unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 16(5), pages 619-636.
  9. 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.
  10. Dale T. Mortensen, 1977. "Unemployment insurance and job search decisions," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
  11. Rodríguez-Planas, Núria, 2012. "Determinants of Immigrants' Cash-Welfare Benefits Intake in Spain," IZA Discussion Papers 6547, Institute for the Study of Labor (IZA).
  12. 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, MIT Press, vol. 111(2), pages 575-604, May.
  13. 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.
  14. Adriaan Kalwij, 2010. "Unemployment durations and the pattern of duration dependence over the business cycle of British males," Empirical Economics, Springer, Springer, vol. 38(2), pages 429-456, April.
  15. Dolado, Juan J. & Garcia-Serrano, Carlos & Jimeno, Juan Francisco, 2001. "Drawing Lessons From the Boom of Temporary Jobs in Spain," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2884, C.E.P.R. Discussion Papers.
  16. Stéphane Bonhomme & Laura Hospido, 2012. "The Cycle Of Earnings Inequality: Evidence From Spanish Social Security Data," Working Papers, CEMFI wp2012_1209, CEMFI.
  17. Konstantinos Tatsiramos, 2009. "Unemployment Insurance in Europe: Unemployment Duration and Subsequent Employment Stability," Journal of the European Economic Association, MIT Press, MIT Press, vol. 7(6), pages 1225-1260, December.
  18. 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.
  19. Arne Uhlendorff & Klaus F. Zimmermann, 2006. "Unemployment Dynamics among Migrants and Natives," Discussion Papers of DIW Berlin 617, DIW Berlin, German Institute for Economic Research.
  20. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, Econometric Society, vol. 52(2), pages 271-320, March.
  21. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(5), pages 972-90, October.
  22. Honore, Bo E, 1993. "Identification Results for Duration Models with Multiple Spells," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 60(1), pages 241-46, January.
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