The Effects of Unemployment Experiences on Subsequent Wages in Italy
This paper has evaluated the impact of unemployment experiences on subsequent wages for a panel of Italian individuals, extracted from the European Community and Household Panel (ECHP) data and ISTAT (Italian National Statistics Office) data for the unemployment rate, selected by age, corresponding year and the region in which the individuals are living. In particular, we have implemented a Within-Group (WG) fixed effect model to deal with the unobserved heterogeneity econometric issue. Indeed, this method allows unobserved effects to be correlated with the observables. From the empirical results, we may observe that unemployed men returning to work have to tolerate a wage penalty of about 5%, while unemployment duration effect is not significant. The estimates, by geographical area, have pointed out a scarring effect higher in the northern regions than in the southern area of the country.
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