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

38 Pages Posted: 5 Sep 2011

See all articles by Bart Cockx

Bart Cockx

Ghent University - Sherppa - Faculty of Economics and Business Administration; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute); IRES, Université Catholique de Louvain

Matteo Picchio

Marche Polytechnic University - Department of Economic and Social Science; IZA Institute of Labor Economics; SHERPPA - Ghent University

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Date Written: August 31, 2011

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.

Keywords: scarring effect of unemployment duration, employment quality, wage in multivariate duration model, selectivity

JEL Classification: C330, C410, J620, J640

Suggested Citation

Cockx, Bart L. W. and Picchio, Matteo, Scarring Effects of Remaining Unemployed for Long-Term Unemployed School-Leavers (August 31, 2011). CESifo Working Paper Series No. 3565, Available at SSRN: https://ssrn.com/abstract=1922695 or http://dx.doi.org/10.2139/ssrn.1922695

Bart L. W. Cockx (Contact Author)

Ghent University - Sherppa - Faculty of Economics and Business Administration ( email )

Ghent, B-9000
Belgium

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
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IRES, Université Catholique de Louvain

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Louvain-la-Neuve
Belgium

Matteo Picchio

Marche Polytechnic University - Department of Economic and Social Science ( email )

Piazzale Martelli, 8
60121 Ancona
Italy
+39 071 220 7176 (Phone)

HOME PAGE: http://www.univpm.it/matteo.picchio

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

SHERPPA - Ghent University ( email )

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Ghent, B-9000
Belgium

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