The Social Cost of Unemployment: The Spanish Labour Market from a Social Welfare Approach

Lucía Gorjón (), Sara de la Rica () and Antonio Villar
Additional contact information
Lucía Gorjón: Fundación ISEAK
Sara de la Rica: University of the Basque Country

No 11850, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper proposes a protocol for considering the social cost of unemployment by taking into account three different aspects: incidence, severity and hysteresis. Incidence refers to the conventional unemployment rate; severity takes in both unemployment duration and the associated income loss; and hysteresis refers to the probability of remaining unemployed. The social cost of unemployment is regarded as a welfare loss, which is measured by a utilitarian social welfare function whose arguments are the individual disutilities of unemployed workers. Each individual disutility is modelled as a function of income loss, unemployment duration and hysteresis. The resulting formula is simple and easy to understand and implement. We apply this assessment protocol to the Spanish labour market, using the official register of unemployed workers compiled by the Public Employment Service.

Keywords: severity and hysteresis of unemployment; incidence; unemployment benefits; social cost of unemployment; Spanish labour market; regional differences (search for similar items in EconPapers)
JEL-codes: I31 J64 J65 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2018-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published - published as 'The Cost of Unemployment from a Social Welfare Approach: The Case of Spain and Its Regions' in: Social Indicators Research, 2020, 150, 955–976

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Related works:
Working Paper: The social cost of unemployment: the Spanish labour market from a social welfare approach (2018)
Working Paper: The social cost of unemployment: the Spanish labour market from a social welfare approach (2018)
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