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

Author

Listed:
  • Bart COCKX

    (Sherppa, Ghent University, Belgium; UCLouvain (IRES), Louvain-la- Neuve; IZA, Bonn and CESIfo, Munich)

  • Matteo PICCHIO

    (CentER, ReflecT, and Department of Economics, Tilburg University,Tilburg, The Netherlands and IZA, Bonn)

Abstract

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.

Suggested Citation

  • Bart COCKX & Matteo PICCHIO, 2011. "Scarring Effects of Remaining Unemployed for Long-Term Unemployed School-Leavers," LIDAM Discussion Papers IRES 2011032, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:2011032
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    More about this item

    Keywords

    scarring effect of unemployment duration; employment quality; wage in multivariate duration model; selectivity;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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