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

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  • Cockx, B.
  • Picchio, M.

    (Tilburg University, Center for Economic Research)

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 Tilburg University, Center for Economic Research in its series Discussion Paper with number 2011-094.

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Date of creation: 2011
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Handle: RePEc:dgr:kubcen:2011094

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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. M. Picchio, 2011. "Lagged Duration Dependence in Mixed Proportional Hazard Models," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/747, Ghent University, Faculty of Economics and Business Administration.
  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. Cockx, Bart, 2013. "Youth Unemployment in Belgium: Diagnosis and Key Remedies," IZA Policy Papers 66, Institute for the Study of Labor (IZA).
  4. Kenneth L. Sørensen, 2012. "Effects of Intensifying Labor Market Programs on Post-Unemployment Wages: Evidence From a Controlled Experiment," Economics Working Papers 2012-20, School of Economics and Management, University of Aarhus.
  5. 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).
  6. 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).

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