Essays on long-term unemployment in Spain
Lafuente Martinez, Cristina
This thesis is comprised of three essays relating to long term unemployment in Spain. The first chapter is methodological analysis of the main dataset that is used throughout the thesis. The second and third chapter provide two applications of the dataset for the study of long term unemployment. The methodology in these chapters can be easily adapted to study unemployment in other countries. Chapter 1. On the use of administrative data for the study of unemployment Social security administrative data are increasingly becoming available in many countries. These are very attractive data as they have a long panel structure (large N, large T) and allow to measure many different variables with higher precision. Because of their nature they can capture aspects that are usually hidden due to design or timing of survey data. However, administrative data are not ready to be used for labour market research, especially studies involving unemployment. The main reason is that administrative data only capture those registered unemployed, and in some cases only those receiving unemployment benefits. The gap between total unemployment and registered unemployment is not constant neither across workers characteristics nor time. In this paper I augment Spanish Social Security administrative data by adding missing unemployment spells using information from the institutional framework. I compare the resulting unemployment rate to that of the Labour Force Survey, showing that both are comparable and thus the administrative dataset is useful for labour market research. I also explore how the administrative data can be used to study some important aspects of the labour market that the Labour Force survey can’t capture. Administrative data can also be used to overcome some of the problems of the Labour Force survey such as changes in the structure of the survey. This paper aims to provide a comprehensive guide on how to adapt administrative datasets to make them useful for studying unemployment. Chapter 2. Unemployment Duration Variance Decomposition `a la ABS: Evidence from Spain Existing studies of unemployment duration typically use self-reported information from labour force surveys. We revisit this question using precise information on spells from administrative data. We follow the recent method proposed by Alvarez, Borovickova and Shimer (2015) for estimating the different components of the duration of unemployment using administrative data and have applied it to Austria. In this paper we apply the same method (the ABS method hereafter) to Spain using Spanish Social Security data. Administrative data have many advantages compared to Labour Force Survey data, but we note that there are some incompleteness that need to be enhanced in order to use the data for unemployment analysis (e.g., unemployed workers that run out of unemployment insurance have no labour market status in the data). The degree and nature of such incompleteness is country-specific and are particularly important in Spain. Following Chapter 1, we deal with these data issues in a systematic way by using information from the Spanish LFS data as well as institutional information. We hope that our approach will provide a useful way to apply the ABS method in other countries. Our findings are: (i) the unemployment decomposition is quite similar in Austria and Spain, specially when minimizing the effect of fixed-term contracts in Spain. (ii) the constant component is the most important one; while (total) heterogeneity and duration dependence are roughly comparable. (iii) also, we do not find big differences in the contribution of the different components along the business cycle. Chapter 3. Search Capital and Unemployment Duration I propose a novel mechanism called search capital to explain long term unemployment patters across different ages: workers who have been successful in finding jobs in the recent past become more efficient at finding jobs in the present. Search ability increases with search experience and depreciates with tenure if workers do not search often enough. This leaves young (who have not gained enough search experience) and older workers in a disadvantaged position, making them more likely to suffer long term unemployment. I focus on the case of Spain, as its dual labour market structure favours the identification of search capital. I provide empirical evidence that search capital affects unemployment duration and wages at the individual level. Then I propose a search model with search capital and calibrate it using Spanish administrative data. The addition of search capital helps the model match the dynamics of unemployment and job finding rates in the data, especially for younger workers.