The ins and outs of unemployment in a two-tier labor market

Abstract

This paper aims to shed some light on the dynamics of the Spanish labor market, using data from the Spanish Labor Force Survey for the period 1987 to 2010. We examine transition rates in a three-state model and compare our results with those reported for the UK and the US. Explicitly introducing the employment duality present in the Spanish labor market, we study labor market dynamics in a four-state model set-up. We also analyze the behavior of these rates within two sub-periods of recession and a further two sub-periods of boom. We provide evidence of the cyclicality of the transition rates using unconditional and conditional correlations. Finally, we compute the contribution of the different transitions to unemployment rate volatility. Our over-all conclusion points out that the employment duality is the key to understand the unemployment volatility and the functioning of the Spanish labor market.JEL Codes: E24, E32, J6

Labour market dynamics and worker heterogeneity during the Great Recession – Evidence from Europe

“…in terms of the rate of increase of the transition rate), the large prevalence of temporary contracts nevertheless implied a very strong increase in the absolute number of transitions from employment to unemployment, which is in line with evidence presented by Eichhorst et al (2010), Bentolila et al (2012), and Silva and Vázquez-Grenno (2013). While temporary contracts play an important role for labour market dynamics during the Great Recession in a number of countries, the reasons for cross-country differences / c : statistically significant at least at the 10%-/5%-/1%-level.…”

New Job Matches and Their Stability Before and During the Crisis

“…The effect of the unemployment rate is stronger in exits to unemployment than in switches to other job during the crisis, in line with the higher importance of employment destruction compared to the reduction of job creation during the crisis (Silva and Vázquez-Grenno, 2013). …”

“…Workers with reduced job-to-job mobility in the recession period are males and immigrants, the youngest age groups, workers with low education level or manual occupations. Finally, 22 According to Silva and Vázquez-Grenno (2013), the contributions of the employment-unemployment hazard is much more important than that of the job finding rate in explaining fluctuations in Spain's macro unemployment rate. Transitions from unemployment to employment before and during the crisis are analyzed in Nagore and van Soest (2014 16-19; 20-24; 25-29; 30-34; 35-39; 40-44; 45-49; 50-55 …”

Job Search Strategies in Times of Crisis: Natives and Immigrants in Spain

“…For instance, between 2007 and 2010, the unemployment rate (for workers between 20 and 64 years old) in Greece, Ireland and Portugal rose from 8.3 to 12.7 per cent, from 4.4 to 13.6 per cent and from 8.2 to 11.1 per cent, respectively. 5 For more details on the duality of the Spanish labor market see, among others, Bentolila et al, (2012) and Silva and V azquez-Grenno (2013). 6 Carrasco et al, (2008) and Amuedo-Dorantes and De la Rica (2011) are two of the first studies that examine the effects of the recent immigration wave on labor market outcomes in Spain.…”

“… For more details on the duality of the Spanish labor market see, among others, Bentolila et al, () and Silva and Vázquez‐Grenno ().…”