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Scarring Effects of Unemployment

Author

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  • Nilsen, Øivind Anti

    () (Norwegian School of Economics)

  • Reiso, Katrine Holm

    () (Norwegian School of Economics)

Abstract

Using Norwegian individual register data of young workers, from the period 1986-2008, we analyse whether there are large and persistent negative relationships between unemployment and the risk of repeated unemployment and being out of labour force. A nearest-neighbour propensity score matching method is applied to make the treatment group (the unemployed) and the control group (the employed) as similar as possible. By tracking workers over a 10-year follow-up period, we find that unemployment has a negative effect on later labour market attachment. This is consistent with existing findings in the literature. The negative effects decrease over time. Using the bounding approach proposed by Rosenbaum (2002) to analyse the importance of unobserved variables, our results indicate that a relatively high level of unobserved selection bias could be present in the data before changing the inference. Thus, unemployment leaves young workers with long-term scars.

Suggested Citation

  • Nilsen, Øivind Anti & Reiso, Katrine Holm, 2011. "Scarring Effects of Unemployment," IZA Discussion Papers 6198, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6198
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    References listed on IDEAS

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    1. Clark, Andrew E & Georgellis, Yannis & Sanfey, Peter, 2001. "Scarring: The Psychological Impact of Past Unemployment," Economica, London School of Economics and Political Science, vol. 68(270), pages 221-241, May.
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    9. Bratsberg, Bernt & Fevang, Elisabeth & Røed, Knut, 2010. "Disability in the Welfare State: An Unemployment Problem in Disguise?," IZA Discussion Papers 4897, Institute for the Study of Labor (IZA).
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    Cited by:

    1. Susaeta, Lourdes & Suárez Ruz, Esperanza & Gutiérrez-Martínez, Isis & Idrovo Carlier, Sandra & Pin, José Ramon, 2015. "A Comparative Analysis of Youth Labor Market Exclusion," IESE Research Papers D/1100, IESE Business School.
    2. Möller Joachim & Umkehrer Matthias, 2015. "Are there Long-Term Earnings Scars from Youth Unemployment in Germany?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 235(4-5), pages 474-498, August.
    3. repec:mes:eaeuec:v:55:y:2017:i:2:p:168-196 is not listed on IDEAS
    4. Schmillen, Achim & Umkehrer, Matthias, 2013. "The scars of youth : effects of early-career unemployment on future unemployment experience," IAB Discussion Paper 201306, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Marjan Petreski & Nikica Mojsoska-Blazevski & Marcelo Bergolo, 2017. "Labor-Market Scars When Youth Unemployment is Extremely High: Evidence from Macedonia," Eastern European Economics, Taylor & Francis Journals, vol. 55(2), pages 168-196, March.
    6. Luis Beccaria & Roxana Maurizio & Martin Trombetta & Gustavo Vázquez, 2016. "Una evaluación del efecto scarring en Argentina," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE, vol. 77, August.
    7. Székely,Miguel & Karver,Jonathan George, 2015. "Youth out of school and out of work in Latin America : a cohort approach," Policy Research Working Paper Series 7421, The World Bank.
    8. Sachverständigenrat zur Begutachtung der Gesamtwirtschaftlichen Entwicklung (ed.), 2014. "Mehr Vertrauen in Marktprozesse. Jahresgutachten 2014/15," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201415, April.

    More about this item

    Keywords

    scarring; unemployment persistency; matching technique;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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