Publication: Jobfinding and wages when longrun unemployment is really long : the case of Spain
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1990-08
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Abstract
This paper uses the "Encuesta de Condiciones de Vida Y Trabajoll (ECVT)··
a survey of the labor force activity of over 61,000 persons in Spain in 1985
when unemployment exceeded 20%--to examine the effect of unemployrnent insurance (UI) and family status on longrun joblessness. It finds that (1)duratían of joblessness 1s 50me 30% longer for those eligible for UI benefits than for those ineligible for UI; (2) the longterm unemployed are
disproportionately secondary workers for whom the family serves as a form of
welfare; (3) hazard rates linking the chances of jobfinding to duration of
unemployment in the 1981-85 period of massive joblessness did not decline
with duration; (4) the length of unemployment spells reduces wages moderately
but has huge effect on the probability that re-employed workers take
secondary sector jobs; (5) the UI eligible earn more and are more likely to
gain regular full-time jobs than those ineligible for UI, congruent with the
additional months of Job search associated with UI.
The estimated effects of duratían on the hazard and on earnings are
consistent with the implications of labor supply and search analysis but not
with the view that long unemployment spells create a class of unemployables.
Our results imply a sizeable reduction in longterm unemployment with economic
recovery.