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A Stigma Theory of Unemployment Duration

In: Advances in the Theory and Measurement of Unemployment

Author

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  • Elazar Berkovitch

Abstract

Empirical studies of unemployment have shown that both the wage and the probability of leaving unemployment (the hazard rate) are negatively correlated with unemployment duration.1 The traditional explanation for unemployment, based upon search theory, does not yield this result.2 The solution developed in previous studies for this problem is heterogeneity, or ‘unobserved characteristics’. Different workers face different distributions of wage offers and, thus, have different reservation wages and different probabilities of leaving unemployment. Through time, workers with higher probabilities of leaving unemployment will leave first. Because of this selectivity problem, the sample of length of unemployment spells, over time, consists of more and more unemployed workers with lower hazard rates.

Suggested Citation

  • Elazar Berkovitch, 1990. "A Stigma Theory of Unemployment Duration," Palgrave Macmillan Books, in: Yoram Weiss & Gideon Fishelson (ed.), Advances in the Theory and Measurement of Unemployment, chapter 2, pages 20-56, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-10688-2_2
    DOI: 10.1007/978-1-349-10688-2_2
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    Citations

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    Cited by:

    1. Rasmus Lentz & Torben Tranaes, 2000. "Job Search, Savings and Wealth Effects," Econometric Society World Congress 2000 Contributed Papers 1447, Econometric Society.
    2. Rasmus Lentz & Torben Tranas, 2005. "Job Search and Savings: Wealth Effects and Duration Dependence," Journal of Labor Economics, University of Chicago Press, vol. 23(3), pages 467-490, July.
    3. Juan Dubra, 2004. "Optimism and Overconfidence in Search," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 198-218, January.
    4. José Ignacio García Pérez, 2003. "Non-stationary Job Search When Jobs Do Not Last Forever: A Structural Estimation to Evaluate Alternative Unemployment Insurance Systems," Economic Working Papers at Centro de Estudios Andaluces E2003/49, Centro de Estudios Andaluces.
    5. Furuya, Kaku, 2002. "A socio-economic model of stigma and related social problems," Journal of Economic Behavior & Organization, Elsevier, vol. 48(3), pages 281-290, July.
    6. Namkee Ahn & José Ignacio García-Pérez, 2002. "Unemployment duration and workers' wage aspirations in Spain," Spanish Economic Review, Springer;Spanish Economic Association, vol. 4(2), pages 103-118.
    7. J. Ignacio García Pérez, 2001. "Non-stationary job search when jobs are not forever: A structural estimation," Economics Working Papers 556, Department of Economics and Business, Universitat Pompeu Fabra.
    8. Turon, Hélène, 2003. "Separability of Duration Dependence and Unobserved Heterogeneity," IZA Discussion Papers 754, Institute of Labor Economics (IZA).
    9. Xavier Joutard & Luis A.I. Sagaon Teyssier, 2006. "Unemployment and employment dynamics in the Mexican segmented labour market," Working Papers halshs-00410460, HAL.
    10. Snower, Dennis J. & Lechthaler, Wolfgang, 2013. "Worker Identity, Employment Fluctuations and Stabilization Policy," IZA Discussion Papers 7413, Institute of Labor Economics (IZA).
    11. van den Berg, Gerard J & van Ours, Jan C, 1996. "Unemployment Dynamics and Duration Dependence," Journal of Labor Economics, University of Chicago Press, vol. 14(1), pages 100-125, January.
    12. Bednarzik, Robert W. & Kern, Andreas & Hisnanick, John J., 2017. "Displacement and Debt: The Role of Debt in Returning to Work in the Period Following the Great Recession," IZA Discussion Papers 10764, Institute of Labor Economics (IZA).
    13. J. Ignacio García‐Pérez, 2006. "Job separation in a non‐stationary search model: a structural estimation to evaluate alternative unemployment insurance systems," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(2), pages 245-272, March.

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