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

  • Bart COCKX

    ()

    (Sherppa, Ghent University, Belgium; UCLouvain (IRES), Louvain-la- Neuve; IZA, Bonn and CESIfo, Munich)

  • Matteo PICCHIO

    ()

    (CentER, ReflecT, and Department of Economics, Tilburg University,Tilburg, The Netherlands and IZA, Bonn)

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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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2011032.

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Length: 36
Date of creation: 18 Aug 2011
Date of revision:
Handle: RePEc:ctl:louvir:2011032
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