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The social cost of unemployment: the Spanish labour market from a social welfare approach

Author

Listed:
  • Lucía Gorjón

    (ISEAK & FEDEA)

  • Sara de la Rica

    (Universidad del País Vasco & FEDEA)

  • Antonio Villar

    (Universidad Pablo de Olavide & IVIE)

Abstract

This paper proposes a protocol for considering the social cost of unemployment by taking into account three different aspects: incidence, severity and hysteresis. Incidence refers to the conventional unemployment rate; severity takes in both unemployment duration and the associated income loss; and hysteresis refers to the probability of remaining unemployed. The social cost of unemployment is regarded as a welfare loss, which is measured by a utilitarian social welfare function whose arguments are the individual disutilities of unemployed workers. Each individual disutility is modelled as a function of income loss, unemployment duration and hysteresis. The resulting formula is simple and easy to understand and implement. We apply this assessment protocol to the Spanish labour market, using the official register of unemployed workers compiled by the Public Employment Service.

Suggested Citation

  • Lucía Gorjón & Sara de la Rica & Antonio Villar, 2018. "The social cost of unemployment: the Spanish labour market from a social welfare approach," Working Papers 18.11, Universidad Pablo de Olavide, Department of Economics.
  • Handle: RePEc:pab:wpaper:18.11
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    References listed on IDEAS

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    Cited by:

    1. José Ignacio García-Pérez & Antonio Villar, 2019. "On the three i’s of employment and the Spanish labour market," Working Papers 19.04, Universidad Pablo de Olavide, Department of Economics.
    2. Lucía Gorjón García & Sara de la Rica & Antonio Villar, 2019. "The social cost of unemployment in Spain: who are the losers?," Working Papers 19.08, Universidad Pablo de Olavide, Department of Economics.
    3. Yonatan Dinku, 2021. "A longitudinal analysis of economic inactivity among Indigenous youth," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 24(1), pages 25-45.

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    More about this item

    Keywords

    social cost of unemployment; unemployment benefits; incidence; severity and hysteresis of unemployment; Spanish labour market; regional differences.;
    All these keywords.

    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
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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