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The effect of unemployment spells on subsequent wages in Spain

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  • Alfonso Rosolia
  • Gilles Saint Paul

Abstract

In our analysis we try and recover the wage loss from unemployment in Spain and see how it is affected by previous unemployment experience, unemployment duration, eligibility for unemployment benefits, and previous wages. We also study its variations across groups. Our main conclusion is that while there is some evidence that labour market rigidities tend to lower it, the wage loss of displaced workers is remarkably high: more than 30%, that is, twice the equivalent figure for the US and France. Wages in Spain suffer from a serious mismeasurement problems that we do our best to control, so that our results are less robust than the ones that would be obtained with better data sets. However, they indicate a large level of wage flexibility in Spain.

Suggested Citation

  • Alfonso Rosolia & Gilles Saint Paul, 1998. "The effect of unemployment spells on subsequent wages in Spain," Economics Working Papers 295, Department of Economics and Business, Universitat Pompeu Fabra.
  • Handle: RePEc:upf:upfgen:295
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    References listed on IDEAS

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    1. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
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    3. William J. Carrington, 1993. "Wage Losses for Displaced Workers: Is It Really the Firm That Matters?," Journal of Human Resources, University of Wisconsin Press, vol. 28(3), pages 435-462.
    4. Lazear, Edward P, 1976. "Age, Experience, and Wage Growth," American Economic Review, American Economic Association, vol. 66(4), pages 548-558, September.
    5. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 217-227.
    6. Heckman, James J & Borjas, George J, 1980. "Does Unemployment Cause Future Unemployment? Definitions, Questions and Answers from a Continuous Time Model of Heterogeneity and State Dependence," Economica, London School of Economics and Political Science, vol. 47(187), pages 247-283, August.
    7. Houle, Mario & Van Audenrode, Marc, 1995. "Job displacement, wages, and unemployment duration in Canada," Labour Economics, Elsevier, vol. 2(1), pages 77-91, March.
    8. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-324, March.
    9. Daniel Cohen & Arnaud Lefranc & Gilles Saint-Paul, 1997. "French unemployment: a transatlantic perspective," Economic Policy, CEPR;CES;MSH, vol. 12(25), pages 265-292, October.
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    Citations

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    Cited by:

    1. José Ignacio García Pérez & Yolanda Rebollo Sanz, 2005. "A Structural Estimation to Evaluate the Wage Penalty after Unemployment in Europe," Economic Working Papers at Centro de Estudios Andaluces E2005/15, Centro de Estudios Andaluces.
    2. Giulio Fella, 2004. "Optimal severance pay in a matching model," 2004 Meeting Papers 794, Society for Economic Dynamics.
    3. Bentolila, Samuel & Ichino, Andrea, 2000. "Unemployment and Consumption: Are Job Losses Less Painful near the Mediterranean?," CEPR Discussion Papers 2539, C.E.P.R. Discussion Papers.
    4. Arnaud Chéron & Jean‐Olivier Hairault & François Langot, 2011. "Age‐Dependent Employment Protection," Economic Journal, Royal Economic Society, vol. 121(557), pages 1477-1504, December.
    5. Gilles Saint-Paul, 2000. "L'anatomie du chômage en Espagne : une comparaison avec la France et les États-Unis," Économie et Statistique, Programme National Persée, vol. 332(1), pages 159-167.
    6. 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.
    7. Arnaud Lefranc, 2002. "Labor Market Dynamics and Wage Losses of Displaced Workers in France and the United-States," THEMA Working Papers 2002-15, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    8. Garcia Perez, Jose Ignacio & Rebollo Sanz, Yolanda, 2005. "Wage changes through job mobility in Europe: A multinomial endogenous switching approach," Labour Economics, Elsevier, vol. 12(4), pages 531-555, August.
    9. Lei Fang & Pedro Silos, 2012. "Wages and unemployment across business cycles: a high-frequency investigation," FRB Atlanta Working Paper 2012-16, Federal Reserve Bank of Atlanta.

    More about this item

    Keywords

    Unemployment; unemployment duration; wages; job search; Spain; displacement; job loss;

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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