A Structural Estimation to Evaluate the Wage Penalty after Unemployment in Europe

J. Ignacio García Pérez (jigarper@upo.es) and Yolanda F. Rebollo-Sanz

No E2005/15, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: We develop a partial equilibrium job search model to analyse wage mobility and its relation to job mobility. The basic job search model is generalized by introducing wage renegotiation at the firm level, on-the-job search and heterogeneity of individuals through the value of time while unemployed. Transitions into and out of unemployment, movement from one job to another without passing through unemployment, and wage growth on the job are all outcomes of this model. We estimate the model structurally in order to identify the sources of wage mobility in four European countries: Spain, Germany, France and Portugal. We find that German and Spanish workers tend to suffer larger wage penalties after unemployment than their French and Portuguese counterparts. Wage losses in Germany are larger and mainly related to better wage opportunities when employed, while in Spain wage losses are lower but tend to remain longer since wage growth while employed is lower than in Germany. We also use the model's structural parameters to evaluate the effect that different changes in the Unemployment Benefit system may have on wage changes after unemployment. We determine that a sole level for unemployment benefits (dependent on the national average wage level) reduces wage penalties for all workers with the exception of the highly educated.

Keywords: Structural estimation; wage mobility; job mobility (search for similar items in EconPapers)
JEL-codes: J31 J60 J64 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2005
New Economics Papers: this item is included in nep-eec and nep-lab
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Citations: View citations in EconPapers (1)

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Working Paper: A Structural Estimation to Evaluate the Wage Penalty After Unemployment in Europe (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:cea:doctra:e2005_15

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