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Unemployment duration and worker's wage aspiration in Spain

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  • Namkee Ahn
  • J. Ignacio García-Pérez

Abstract

This paper examines unemployed workers' declared willingness to work for a wage lower than the one warranted by their qualification. We analyze which personal and economic characteristics determine this willingness and how it changes as unemployment spells lengthen. Moreover, we also study the influence of this willingness on unemployment duration. The main results are: (i) Young workers, those less educated and those living in regions with high unemployment show a more positive attitude towards accepting lower wages while married women with a working husband show more negative attitudes; (ii) The exhaustion of unemployment benefits has positive effects in the transition probability of the attitude from negative to positive; (iii) The effect of this attitude on the unemployment hazard rate is positive but only marginally significant which may be showing that this willingness is not only reflecting the worker's reservation wage but also some unobserved heterogeneity; (iv) The negative duration dependence of the unemployment hazard rate is substantially reduced when unobserved heterogeneity is controlled for.

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Bibliographic Info

Paper provided by FEDEA in its series Studies on the Spanish Economy with number 58.

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Handle: RePEc:fda:fdaeee:58

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Keywords: Reservation wage; unemployment duration; unobserved heterogenety;

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References

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  1. Berg, G.J. van den, 1987. "Nonstationarity in job search theory," Research Memorandum 242, Tilburg University, Faculty of Economics and Business Administration.
  2. Mortensen, Dale T., 1987. "Job search and labor market analysis," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 15, pages 849-919 Elsevier.
  3. Blanchard, Olivier Jean & Diamond, Peter A, 1994. "Ranking, Unemployment Duration, and Wages," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 417-34, July.
  4. Ahn, Namkee & de la Rica, Sara & Ugidos, Arantza, 1999. "Willingness to Move for Work and Unemployment Duration in Spain," Economica, London School of Economics and Political Science, vol. 66(263), pages 335-57, August.
  5. 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.
  6. Stancanelli, Elena G F, 1999. " Do the Rich Stay Unemployed Longer? An Empirical Study for the UK," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(3), pages 295-314, August.
  7. Ahn, Namkee & Ugidos-Olazabal, Arantza, 1995. "Duration of Unemployment in Spain: Relative Effects of Unemployment Benefit and Family Characteristics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(2), pages 249-64, May.
  8. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July.
  9. Garcia-Perez, J.I., 1998. "Non-Stationary Job Search with Firing: a Structural Estimation," Papers 9802, Centro de Estudios Monetarios Y Financieros-.
  10. Olympia Bover & Manuel Arellano & Samuel Bentolila, 2002. "Unemployment Duration, Benefit Duration and the Business Cycle," Economic Journal, Royal Economic Society, vol. 112(479), pages 223-265, April.
  11. 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.
  12. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
  13. Devine, Theresa J. & Kiefer, Nicolas M., 1991. "Empirical Labor Economics: The Search Approach," OUP Catalogue, Oxford University Press, number 9780195059366, September.
  14. 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.
  15. Namkee Ahn & Sara La De Rica, 1997. "The underground economy in Spain: an alternative to unemployment?," Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 733-743.
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Cited by:
  1. Anders Forslund & Alan Krueger, 2010. "Did Active Labor Market Policies Help Sweden Rebound from the Depression of the Early 1990s?," NBER Chapters, in: Reforming the Welfare State: Recovery and Beyond in Sweden, pages 159-187 National Bureau of Economic Research, Inc.
  2. Peter Fredriksson & Bertil Holmlund, 2003. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," CESifo Working Paper Series 922, CESifo Group Munich.
  3. José Ignacio García Pérez & Fernando Múñoz Bullón, 2001. "The Nineties in Spain: so much Flexibility in the Labor Market?," Economic Working Papers at Centro de Estudios Andaluces E2001/01, Centro de Estudios Andaluces.
  4. Jacobo de Uña Álvarez & Gema Álvarez Llorente & Mª Soledad Otero Giráldez, 2004. "Estimation of time spent in unemployment for married women: An application at regional level," Working Papers 0410, Universidade de Vigo, Departamento de Economía Aplicada.
  5. J. Ignacio Garc�a-Pérez, 2006. "Job separation in a non-stationary search model: a structural estimation to evaluate alternative unemployment insurance systems," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(2), pages 245-272.
  6. José Ignacio García Pérez & Yolanda Rebollo Sanz, 2005. "A Structural Estimation to Evaluate the Wage Penalty after Unemployment in Europe," Economic Working Papers at Centro de Estudios Andaluces E2005/15, Centro de Estudios Andaluces.
  7. Gema Álvarez Llorente & Mª Soledad Otero Giráldez & Alberto Rodríguez Casal & Jacobo de Uña Álvarez, 2004. "La duración del desempleo de la mujer casada en Galicia," Working Papers 0409, Universidade de Vigo, Departamento de Economía Aplicada.

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