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

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  • B. COCKX

    ()

  • M. 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 Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 11/731.

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Length: 38 pages
Date of creation: Aug 2011
Date of revision:
Handle: RePEc:rug:rugwps:11/731

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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. Picchio, Matteo, 2011. "Lagged Duration Dependence in Mixed Proportional Hazard Models," IZA Discussion Papers 6089, Institute for the Study of Labor (IZA).
  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. 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).
  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. McGinnity, Fran & Russell, Helen & Watson, Dorothy & Kingston, Gillian & Kelly, Elish, 2014. "Winners and Losers? The Equality Impact of the Great Recession in Ireland," Research Series, Economic and Social Research Institute (ESRI), number 265, September.
  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).
  7. 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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