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

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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File URL: http://wps-feb.ugent.be/Papers/wp_11_731.pdf
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Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 11/731.

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Length: 38 pages
Date of creation: Aug 2011
Date of revision:
Handle: RePEc:rug:rugwps:11/731
Contact details of provider: Postal: Hoveniersberg 4, B-9000 Gent
Phone: ++ 32 (0) 9 264 34 61
Fax: ++ 32 (0) 9 264 35 92
Web page: http://www.ugent.be/eb

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  1. Drago, Robert & Heywood, John S, 1992. "Is Worker Behaviour Consistent with Efficiency Wages?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 39(2), pages 141-53, May.
  2. Yannis M. Ioannides & Linda Datcher Loury, 2004. "Job Information Networks, Neighborhood Effects, and Inequality," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1056-1093, December.
  3. van den Berg, Gerard J & van der Klaauw, Bas, 2001. "Counselling and Monitoring of Unemployed Workers: Theory and Evidence from a Controlled Social Experiment," CEPR Discussion Papers 2986, C.E.P.R. Discussion Papers.
  4. Donald, Stephen G & Green, David A & Paarsch, Harry J, 2000. "Differences in Wage Distributions between Canada and the United States: An Application of a Flexible Estimator of Distribution Functions in the Presence of Covariates," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 609-33, October.
  5. Gaure, Simen & Røed, Knut & Westlie, Lars, 2008. "The Impacts of Labor Market Policies on Job Search Behavior and Post-Unemployment Job Quality," Memorandum 22/2008, Oslo University, Department of Economics.
  6. repec:dgr:kubcen:201095 is not listed on IDEAS
  7. Lori G. Kletzer & Robert W. Fairlie, 2003. "The long-term costs of job displacement for young adult workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(4), pages 682-698, July.
  8. Belzil, Christian, 1995. "Unemployment Insurance and Unemployment over Time: An Analysis with Event History Data," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 113-26, February.
  9. Bart Cockx & Matteo Picchio, 2012. "Are Short-lived Jobs Stepping Stones to Long-Lasting Jobs?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(5), pages 646-675, October.
  10. Arni, Patrick & Lalive, Rafael & van Ours, Jan C., 2009. "How effective are unemployment benefit sanctions? Looking beyond unemployment exit," Working Paper Series 2009:22, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  11. Tatsiramos, Konstantinos, 2006. "Unemployment Insurance in Europe: Unemployment Duration and Subsequent Employment Stability," IZA Discussion Papers 2280, Institute for the Study of Labor (IZA).
  12. Brinch, Christian N., 2007. "Nonparametric Identification Of The Mixed Hazards Model With Time-Varying Covariates," Econometric Theory, Cambridge University Press, vol. 23(02), pages 349-354, April.
  13. McCall, Brian & Chi, Wei, 2008. "Unemployment insurance, unemployment durations and re-employment wages," Economics Letters, Elsevier, vol. 99(1), pages 115-118, April.
  14. Jurajda, Štepán, 2001. "Estimating the Effect of Unemployment Insurance Compensation on the Labor Market Histories of Displaced Workers," IZA Discussion Papers 294, Institute for the Study of Labor (IZA).
  15. Richard B. Freeman & David A. Wise, 1982. "The Youth Labor Market Problem: Its Nature Causes and Consequences," NBER Chapters, in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 1-16 National Bureau of Economic Research, Inc.
  16. Horny, G. & Picchio, M., 2009. "Identification of lagged duration dependence in multiple-spell competing risks models," Working papers 260, Banque de France.
  17. Jaap H. Abbring & Gerard J. van den Berg, 2003. "The identifiability of the mixed proportional hazards competing risks model," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 65(3), pages 701-710.
  18. Jeffrey M Wooldridge, 2002. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," CeMMAP working papers CWP18/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  19. Matt Jackson, 2003. "The Effects of Social Networks on Employment and Inequality," Theory workshop papers 658612000000000032, UCLA Department of Economics.
  20. Samuel Bentolila & Claudio Michelacci & Javier Suarez, 2004. "Social Contacts And Occupational Choice," Working Papers wp2004_06, CEMFI.
  21. Gaure, Simen & Røed, Knut & Zhang, Tao, 2005. "Time and Causality: A Monte Carlo Assessment of the Timing-of-Events Approach," Memorandum 19/2005, Oslo University, Department of Economics.
  22. Gerard J, Van den Berg & Bas Van der Klmaauw, 1998. "Combining Micro and Macro Unemployment Duration Data," Working Papers 98-58, Centre de Recherche en Economie et Statistique.
  23. David Card & Raj Chetty & Andrea Weber, 2007. "Cash-On-Hand and Competing Models of Intertemporal Behavior: New Evidence from the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 122(4), pages 1511-1560, November.
  24. Doiron, Denise & Gørgens, Tue, 2008. "State dependence in youth labor market experiences, and the evaluation of policy interventions," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 81-97, July.
  25. Simon, Curtis J & Warner, John T, 1992. "Matchmaker, Matchmaker: The Effect of Old Boy Networks on Job Match Quality, Earnings, and Tenure," Journal of Labor Economics, University of Chicago Press, vol. 10(3), pages 306-30, July.
  26. Bratberg, Espen & Nilsen, Oivind Anti, 2000. " Transitions from School to Work and the Early Labour Market Experience," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(0), pages 909-29, Special I.
  27. Vishwanath, Tara, 1989. "Job Search, Stigma Effect, and Escape Rate from Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 487-502, October.
  28. Ehrenberg, Ronald G & Oaxaca, Ronald L, 1976. "Unemployment Insurance, Duration of Unemployment, and Subsequent Wage Gain," American Economic Review, American Economic Association, vol. 66(5), pages 754-66, December.
  29. Linda Datcher Loury, 2006. "Some Contacts Are More Equal than Others: Informal Networks, Job Tenure, and Wages," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 299-318, April.
  30. Christian Belzil, 2001. "Unemployment insurance and subsequent job duration: job matching versus unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(5), pages 619-636.
  31. Amynah Vanessa Gangji & Robert Plasman, 2007. "The Matthew effect of unemployment: how does it affect wages in Belgium," DULBEA Working Papers 07-19.RS, ULB -- Universite Libre de Bruxelles.
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