Are the Spanish Long-Term Unemployed Unemployable?

48 Pages Posted: 27 Feb 2017

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)

J. Ignacio Garacia-Perez

Universidad Pablo de Olavide - Department of Economics

Marcel Jansen

Universidad Carlos III de Madrid - Department of Economics; IZA Institute of Labor Economics

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Abstract

Long-term unemployment reached unprecedented levels in Spain in the wake of the Great Recession and it still affects around 57% of the unemployed. We document the sources that contributed to the rise in long-term unemployment and analyze its persistence using state-of-the-art duration models. We find pervasive evidence of negative duration dependence, while personal characteristics such as mature age, lack of experience, and entitlement to unemployment benefits are key to understand the cross-sectional differences in the incidence of long-term unemployment. The negative impact of low levels of skill and education is muted by the large share of temporary contracts, but once we restrict attention to employment spells lasting at least one month these factors also contribute to a higher risk of long-term unemployment. Surprisingly, workers from the construction sector do not fare worse than similar workers from other sectors. Finally, self-reported reservation wages are found to respond strongly to the cycle, but much less to individual unemployment duration. In view of these findings, we argue that active labor market policies should play a more prominent role in the fight against long-term unemployment while early activation should be used to curb inflows.

Keywords: long-term unemployment, Great Recession, duration models, survival probability, Spain

JEL Classification: J63, J64, J65, C41

Suggested Citation

Bentolila, Samuel and Garcia-Perez, J. Ignacio and Jansen, Marcel, Are the Spanish Long-Term Unemployed Unemployable?. IZA Discussion Paper No. 10580. Available at SSRN: https://ssrn.com/abstract=2923666

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

J. Ignacio Garcia-Perez

Universidad Pablo de Olavide - Department of Economics ( email )

Ctra. Utrera, Km.1
Sevilla, Seville 41010
Spain

HOME PAGE: http://www.upo.es/econ/garcia/

Marcel Jansen

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34 91 624 5740 (Phone)
+34 91 624 9875 (Fax)

IZA Institute of Labor Economics

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

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