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Jobfinding and Wages when Longrun Unemployment is Really Long: The Case of Spain


  • Alfonso Alba-Ramirez
  • Richard B. Freeman


This paper uses the "Encuesta de Condiciones de Vida Y Trabajo" (EGVT) -- a survey of the labor force activity of over 61,000 persons in Spain in 1985 when unemployment exceeded 20%--to examine the effect of unemployment insurance (UI) and family status on long-run joblessness. It finds that (1) duration of joblessness is some 30' longer for those eligible for UI benefits than for those ineligible for UI; (2) the long-term unemployed are disproportionately secondary workers for whom the family serves as a form of welfare; (3) hazard rates linking the chances of job finding to duration of unemployment in the 1981-85 period of massive joblessness did not decline with duration; (4) the length of unemployment spells reduces wages moderately but has huge effect on the probability that re-employed workers take secondary sector jobs; (5) the UI eligible earn more and are more likely to gain regular full-time jobs than those ineligible for UI, congruent with the additional months of job search associated with UI. The estimated effects of duration on the hazard and on earnings are consistent with the implications of labor supply and search analysis but not with the view that long unemployment spells create a class of unemployables. Our results imply a sizeable reduction in long-term unemployment with economic recovery.

Suggested Citation

  • Alfonso Alba-Ramirez & Richard B. Freeman, 1990. "Jobfinding and Wages when Longrun Unemployment is Really Long: The Case of Spain," NBER Working Papers 3409, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3409
    Note: LS

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    References listed on IDEAS

    1. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 351-380, October.
    2. Addison, John T & Portugal, Pedro, 1989. "Job Displacement, Relative Wage Changes, and Duration of Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 281-302, July.
    3. Lawrence F. Katz, 1986. "Layoffs, Recall and the Duration of Unemployment," NBER Working Papers 1825, National Bureau of Economic Research, Inc.
    4. repec:fth:prinin:249 is not listed on IDEAS
    5. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
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    7. Burdett, Kenneth, 1979. "Unemployment Insurance Payments as a Search Subsidy: A Theoretical Analysis," Economic Inquiry, Western Economic Association International, vol. 17(3), pages 333-343, July.
    8. Kenneth Burdett & Tara Vishwanath, 1988. "Declining Reservation Wages and Learning," Review of Economic Studies, Oxford University Press, vol. 55(4), pages 655-665.
    9. Narendranathan, W & Nickell, S & Stern, J, 1985. "Unemployment Benefits Revisited," Economic Journal, Royal Economic Society, vol. 95(378), pages 307-329, June.
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    Cited by:

    1. Alfonso Alba-Ramirez, 1999. "Explaining the transitions out of unemployment in Spain: the effect of unemployment insurance," Applied Economics, Taylor & Francis Journals, vol. 31(2), pages 183-193.
    2. Olympia Bover & Manuel Arellano & Samuel Bentolila, 2002. "Unemployment Duration, Benefit Duration and the Business Cycle," Economic Journal, Royal Economic Society, vol. 112(479), pages 223-265, April.
    3. Maia Guell, 2000. "The effects of fixed-term contracts on the duration distribution of unemployment: the Spanish case," Working Papers 822, Princeton University, Department of Economics, Industrial Relations Section..
    4. Maia Guell, 2000. "The Effects of Fixed-Term Contracts on the Duration Distribution of Unemployment: the Spanish Case," Working Papers 822, Princeton University, Department of Economics, Industrial Relations Section..
    5. Canziani, Patrizia, 1997. "Firing costs and stigma: an empirical analysis," LSE Research Online Documents on Economics 20330, London School of Economics and Political Science, LSE Library.
    6. Villagarcía, Teresa, 1992. "Measuring the effects of covariates on duration data through completely censored and lengith biased cps-like data," UC3M Working papers. Economics 2840, Universidad Carlos III de Madrid. Departamento de Economía.
    7. Jenkins, Stephen P. & Garcia-Serrano, Carlos, 2000. "Re-employment probabilities for Spanish men: what role does the unemployment benefit system play?," ISER Working Paper Series 2000-17, Institute for Social and Economic Research.
    8. Adriana D. Kugler & Gilles Saint Paul, 2000. "Hiring and firing costs, adverse selection and long-term unemployment," Economics Working Papers 447, Department of Economics and Business, Universitat Pompeu Fabra.
    9. Alba, Alfonso, 1998. "The effect of unemployment compensation on the re-employment probability in Spain," UC3M Working papers. Economics 4136, Universidad Carlos III de Madrid. Departamento de Economía.
    10. 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.
    11. Alba, Alfonso, 1996. "Explaining the trasitions out of unemployement in Spain : the effect of unemployement insurance," UC3M Working papers. Economics 4108, Universidad Carlos III de Madrid. Departamento de Economía.

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