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The ins and outs of unemployment in a two-tier labor market

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  • Silva, José I.
  • Vázquez-Grenno, Javier

Abstract

This paper aims to shed some light on the dynamics of the Spanish labor market, using data from the Spanish Labor Force Survey for the period 1987 to 2010. We examine transition rates in a three-state model and compare our results with those reported for the UK and the US. Explicitly, introducing the employment duality present in the Spanish labor market, we study labor market dynamics in a four-state model set-up and we compute the contribution of the different transitions rates to unemployment fluctuations. Our main findings are as follows: i) around 85% the employment–unemployment gross flows involve temporary contracts; ii) the transition rates involving temporary employment account for around 60% of the fluctuations in the unemployment rate; iii) almost 80% of the unemployment rate volatility – explained by movements between unemployment and employment – involves the transition rates to/from temporary jobs. Our overall conclusion points out that the employment duality is the key to understanding the unemployment volatility and the functioning of the Spanish labor market.

Suggested Citation

  • Silva, José I. & Vázquez-Grenno, Javier, 2013. "The ins and outs of unemployment in a two-tier labor market," Labour Economics, Elsevier, vol. 24(C), pages 161-169.
  • Handle: RePEc:eee:labeco:v:24:y:2013:i:c:p:161-169
    DOI: 10.1016/j.labeco.2013.08.009
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    3. Fontaine, Idriss & Gálvez-Iniesta, Ismael & Gomes, Pedro & Vila-Martin, Diego, 2020. "Labour market flows: Accounting for the public sector," Labour Economics, Elsevier, vol. 62(C).
    4. Yvonne Adema & Kees Folmer & Gerrit Hugo Heuvelen & Sonny Kuijpers & Rob Luginbuhl & Bas Scheer, 2020. "Unemployment Forecasts: Room for Improvement?," De Economist, Springer, vol. 168(3), pages 403-417, September.
    5. Julien Albertini & Arthur Poirier & Thepthida Sopraseuth, 2019. "Informal Work along the Business Cycle: Evidence from Argentina," Working Papers halshs-02112004, HAL.
    6. Hairault, Jean-Olivier & Le Barbanchon, Thomas & Sopraseuth, Thepthida, 2015. "The cyclicality of the separation and job finding rates in France," European Economic Review, Elsevier, vol. 76(C), pages 60-84.
    7. Sara Rica & Yolanda F. Rebollo-Sanz, 2017. "Gender Differentials in Unemployment Ins and Outs during the Great Recession in Spain," De Economist, Springer, vol. 165(1), pages 67-99, March.
    8. Shibata Ippei, 2020. "Is Labor Market Mismatch a Big Deal in Japan?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 20(2), pages 1-28, June.
    9. Olivier Charlot & Idriss Fontaine & Thepthida Sopraseuth, 2019. "Employment Fluctuations, Job Polarization and Non-Standard Work: Evidence from France and the US," THEMA Working Papers 2019-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    10. Ronald Bachmann & Peggy Bechara & Anica Kramer & Sylvi Rzepka, 2015. "Labour market dynamics and worker heterogeneity during the Great Recession – Evidence from Europe," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-29, December.
    11. Elisabet Motellón & Enrique López-Bazo, 2015. "Job Loss Among Immigrant and Native Workers: Evidence from Spain’s Economic Downturn," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 120(2), pages 345-371, January.
    12. Rothe, Thomas & Wälde, Klaus, 2017. "Where did all the unemployed go? : Non-standard work in Germany after the Hartz reforms," IAB Discussion Paper 201718, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    13. Yolanda Rebollo-Sanz & J. García-Pérez, 2015. "Are unemployment benefits harmful to the stability of working careers? The case of Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 6(1), pages 1-41, March.
    14. Fiaschi, Davide & Tealdi, Cristina, 2021. "A General Methodology to Measure Labour Market Dynamics," IZA Discussion Papers 14254, Institute of Labor Economics (IZA).
    15. Amparo Nagore García & Arthur Soest, 2017. "Unemployment Exits Before and During the Crisis," LABOUR, CEIS, vol. 31(4), pages 337-368, December.
    16. Maurizio Baussola & Jamie Jenkins & Chiara Mussida & Matthew Penfold, 2015. "The Unemployment Gender Gap in a Comparative Perspective," Discussion Papers 5_2015, CRISEI, University of Naples "Parthenope", Italy.
    17. Cristina Lafuente, 0. "Unemployment in administrative data using survey data as a benchmark," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 0, pages 1-39.
    18. Cristina Lafuente, 2018. "Search capital and Unemployment Duration," 2018 Meeting Papers 427, Society for Economic Dynamics.
    19. Cristina Lafuente, 2020. "Unemployment in administrative data using survey data as a benchmark," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 11(2), pages 115-153, June.
    20. Francisco Guijarro, 2018. "Economic Recovery and Effectiveness of Active Labour Market Initiatives for the Unemployed in Spain: A Gender Perspective of the Valencian Region," Sustainability, MDPI, Open Access Journal, vol. 10(10), pages 1-15, October.
    21. Pedro Gomes, 2015. "The importance of frequency in estimating labour market transition rates," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-10, December.
    22. Cristina Lafuente, 2018. "The best of the two worlds: assessing the use of administrative data for the study of employment," Edinburgh School of Economics Discussion Paper Series 286, Edinburgh School of Economics, University of Edinburgh.
    23. NAGORE GARCIA Amparo & VAN SOEST Arthur, 2016. "Unemployment Exits Before and During the Crisis," LISER Working Paper Series 2016-14, LISER.
    24. Cristina Lafuente, 2017. "Search capital and Unemployment Duration (Preliminary)," Edinburgh School of Economics Discussion Paper Series 283, Edinburgh School of Economics, University of Edinburgh.

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    More about this item

    Keywords

    Job finding rate; Job separation rate; Unemployment;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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