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Unemployment and Consumption: Are Job Losses Less Painful near the Mediterranean?

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  • Bentolila, Samuel
  • Ichino, Andrea

Abstract

In this paper we analyse the relationship between unemployment and consumption. We study this relationship with panel data on households in five countries: Spain and Italy (the South), and Germany, Britain, and the US (the North). Our empirical results indicate that an increase in the duration of unemployment spells of male household heads is associated with smaller consumption losses in Spanish and Italian households. We discuss this finding in the light of different market and institutional frameworks. Given that the coverage and generosity of social welfare institutions are both higher in the North, and that credit and insurance markets are also more developed in the North than in the South, existing theories of consumption indicate that in the South consumption should fall more than in the North when the male household head becomes unemployed. This and other evidence supports the hypothesis that extended family networks, which appear to be stronger near the Mediterranean, provide a fundamental source of insurance against unemployment in southern Europe.

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  • Bentolila, Samuel & Ichino, Andrea, 2000. "Unemployment and Consumption: Are Job Losses Less Painful near the Mediterranean?," CEPR Discussion Papers 2539, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2539
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    Cited by:

    1. Paola Giuliano, 2007. "Living Arrangements in Western Europe: Does Cultural Origin Matter?," Journal of the European Economic Association, MIT Press, vol. 5(5), pages 927-952, September.
    2. Yann Algan & Pierre Cahuc, 2005. "The Roots of Low European Employment: Family Culture?," NBER Chapters,in: NBER International Seminar on Macroeconomics 2005, pages 65-109 National Bureau of Economic Research, Inc.
    3. Alger, Ingela & Weibull, Jörgen, 2007. "The Fetters of the Sib: Weber Meets Darwin," SSE/EFI Working Paper Series in Economics and Finance 682, Stockholm School of Economics.
    4. Ingela Alger & Jörgen W. Weibull, 2006. "Altruism and Climate," Boston College Working Papers in Economics 643, Boston College Department of Economics.
    5. María Dolores Guilló & Antonia Díaz, 2000. "Family Ties And Unemployment," Working Papers. Serie AD 2000-07, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    6. Stephan Klasen & Ingrid Woolard, 2009. "Surviving Unemployment Without State Support: Unemployment and Household Formation in South Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 18(1), pages 1-51, January.
    7. Juan F. Jimeno & Diego Rodríguez-Palenzuela, "undated". "Youth unemployment in the OECD: Demographic shifts, labour market institutions, and macroeconomic shocks," Working Papers 2002-15, FEDEA.
    8. Francois Fontaine, 2003. "Do workers really benefit from their social networks?," Macroeconomics 0311002, EconWPA, revised 26 Aug 2004.
    9. De Paola, Maria & Scoppa, Vincenzo, 2005. "The Role of Family Ties in the Labour Market. An Interpretation Based on Efficiency Wage Theory," MPRA Paper 8956, University Library of Munich, Germany.
    10. Rafael Di Tella & Robert MacCulloch, 2002. "Informal Family Insurance And The Design Of The Welfare State," Economic Journal, Royal Economic Society, vol. 112(481), pages 481-503, July.
    11. Koeniger, Winfried, 2001. "Labor and Financial Market Interactions: The Case of Labor Income Risk and Car Insurance in the UK 1969-95," IZA Discussion Papers 240, Institute for the Study of Labor (IZA).
    12. Isabelle Terraz, 2006. "Le vécu des chômeurs européens : de grandes disparités," Bulletin de l'Observatoire des politiques économiques en Europe, Observatoire des Politiques Économiques en Europe (OPEE), vol. 13(1), December.
    13. Isabelle Terraz, 2005. "Le vécu des chômeurs européens : de grandes disparités," Bulletin de l'Observatoire des politiques économiques en Europe, Observatoire des Politiques Économiques en Europe (OPEE), vol. 13(1), pages 14-17, December.
    14. Adriana D. Kugler, 2001. "From severance pay to self-insurance: Effects of severance payments savings accounts in Colombia," Economics Working Papers 592, Department of Economics and Business, Universitat Pompeu Fabra.
    15. Namkee Ahn, & Juan F. Jimeno & Arantza Ugidos, "undated". "“Mondays at the sun”: Unemployment, Time Use, and Consumption Patterns in Spain," Working Papers 2003-18, FEDEA.
    16. Bachmann, Ronald & Beimann, Boris & Bredtmann, Julia & David, Peggy & Ehlert, Christoph & Kassenböhmer, Sonja & Schaffner, Sandra & Siemers, Lars, 2011. "Studies on flexicurity Lot 1: Study on various aspects of labour market performance using micro data from the European Union statistics on income and living conditions (EU-SILC). Contract No. VC/2010/," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 72620, July.
    17. Wolfgang Lutz & Vegard Skirbekk, 2005. "Policies Addressing the Tempo Effect in Low-Fertility Countries," Population and Development Review, The Population Council, Inc., vol. 31(4), pages 699-720.
    18. Josep Pijoan-Mas, 2006. "Precautionary Savings or Working Longer Hours?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 326-352, April.
    19. repec:ulp:buopee:v::y:2006:m:12:i:5 is not listed on IDEAS
    20. Andrea Ichino & Anna Sanz De Galdeano, 2004. "Reconciling Motherhood and Work: Evidence from Time Use Data in Three Countries," CSEF Working Papers 114, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    21. Namkee Ahn & Juan Ramón García & Juan F. Jimeno, "undated". "Well-being Consequences of Unemployment in Europe," Working Papers 2004-11, FEDEA.
    22. C. Vilaplana & José M. Labeaga & S. Jiménez-Martín, 2006. "Further evidence about alcohol consumption and the business cycle," Working Papers 2006-06, FEDEA.
    23. Jose Ripoll, 2003. "National Appointments to Multinational Monetary Policy Making: A Role Conflict?," Macroeconomics 0301009, University Library of Munich, Germany.
    24. Rafael Muñoz de Bustillo Llorente, 2002. "Spain and the Neoliberal Paradigm," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2002-02, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    25. Adela Luque & C.J. Krizan, 2009. "The Micro-Dynamics of Skill Mix Changes in a Dual Labor Market: The Spanish Manufacturing Experience," Working Papers 09-12, Center for Economic Studies, U.S. Census Bureau.

    More about this item

    Keywords

    Consumption; Savings; Unemployment;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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