Unemployment and Consumption: Are Job Losses Less Painful Near the Mediterranean?

41 Pages Posted: 16 Jan 2001

See all articles by Samuel Bentolila

Samuel Bentolila

Centro de Estudios Monetarios y Financieros (CEMFI); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Andrea Ichino

University of Bologna

Multiple version iconThere are 2 versions of this paper

Date Written: November 2000

Abstract

In this paper we analyze the relationship between unemployment and consumption. We study this relationship with panel data on households in five countries: Spain and Italy (the South), and Germany, Britain, and the US (the North). Our empirical results indicate that an increase in the duration of unemployment spells of male household heads is associated with smaller consumption losses in Spanish and Italian households. We discuss this finding in the light of different market and institutional frameworks. Given that the coverage and generosity of social welfare institutions are both higher in the North, and that credit and insurance markets are also more developed in the North than in the South, existing theories of consumption indicate that in the South consumption should fall more than in the North when the male household head becomes unemployed. This and other evidence supports the hypothesis that extended family networks, which appear to be stronger near the Mediterranean, provide a fundamental source of insurance against unemployment in southern Europe.

Keywords: Consumption, Savings, Unemployment

JEL Classification: E21, E24

Suggested Citation

Bentolila, Samuel and Ichino, Andrea, Unemployment and Consumption: Are Job Losses Less Painful Near the Mediterranean? (November 2000). CESifo Working Paper No. 372. Available at SSRN: https://ssrn.com/abstract=255108

Samuel Bentolila (Contact Author)

Centro de Estudios Monetarios y Financieros (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain
+34 91 429 0551 (Phone)
+34 91 429 1056 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Andrea Ichino

University of Bologna ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy
+39 349 5965919 (Phone)

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