EconPapers    
Economics at your fingertips  
 

The Matthew effect of unemployment: how does it affect wages in Belgium

Amynah Gangji and Robert Plasman ()

No 07-19.RS, DULBEA Working Papers from ULB -- Universite Libre de Bruxelles

Abstract: Better understand the consequences of unemployment in terms of labour market opportunities as well as psychological well-being is of primary importance for any policies aimed at reducing unemployment. One way by which unemployment may impact on future labour market outcomes is through a reduction of subsequent earnings. This study therefore investigates the effects of the incidence and duration of unemployment on re-entry wages in Belgium using the Panel Study on Belgian Households for the period 1994-2002. The methodology used is based on a fixed effects model controlling for unobserved heterogeneity and sample selection bias. Results suggest that unemployment most often has a detrimental effect in terms of future labour market prospects. In other words, it can hardly be seen as an investment period allowing the unemployed to find a better match afterwards. The unemployment penalty may vanish if the unemployed find a stable job. However they are most often characterized by smaller average number of tenure years than individuals who did not go through such an experience. Consequently there is a risk that individuals having experienced unemployment will never be able to eliminate the wage penalty if they do not enter into stable job. Finally, we have found robust evidence that the wage penalty increases as the unemployment spell lengthens. This result is particularly alarming given the high proportion of long term unemployment in Belgium. These conclusions imply that unemployment costs go beyond the simple loss of income and human capital associated with job loss. This implies a substantial leeway for public intervention.

Keywords: unemployment incidence and duration; wage penalty; fixed effects model; sample selection bias. (search for similar items in EconPapers)
JEL-codes: C23 J64 (search for similar items in EconPapers)
Pages: 43 p.
Date: 2007-10
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19) Track citations by RSS feed

Published by: DULBEA - Université libre de Bruxelles, Bruxelles

Downloads: (external link)
https://dipot.ulb.ac.be/dspace/bitstream/2013/7884/1/rp-0063.pdf rp-0063 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:dul:wpaper:07-19rs

Ordering information: This working paper can be ordered from
http://hdl.handle.ne ... .ulb.ac.be:2013/7884

Access Statistics for this paper

More papers in DULBEA Working Papers from ULB -- Universite Libre de Bruxelles Contact information at EDIRC.
Bibliographic data for series maintained by Benoit Pauwels ().

 
Page updated 2020-08-08
Handle: RePEc:dul:wpaper:07-19rs