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Scarring effects of unemployment

Nilsen, Øivind Anti; Reiso, Katrine Holm
Working paper
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URI
http://hdl.handle.net/11250/163350
Date
2011-12
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  • Discussion papers (SAM) [579]
Abstract
Using Norwegian individual register data of young workers, from the period 1986-2008, we

analyse whether there are large and persistent negative relationships between unemployment

and the risk of repeated unemployment and being out of labour force. A nearest-neighbour

propensity score matching method is applied to make the treatment group (the unemployed)

and the control group (the employed) as similar as possible. By tracking workers over a 10-

year follow-up period, we find that unemployment has a negative effect on later labour

market attachment. This is consistent with existing findings in the literature. The negative

effects decrease over time. Using the bounding approach proposed by Rosenbaum (2002) to

analyse the importance of unobserved variables, our results indicate that a relatively high

level of unobserved selection bias could be present in the data before changing the inference.

Thus, unemployment leaves young workers with long-term scars.
Publisher
Norwegian School of Economics, Department of Economics
Series
Discussion Papers;26/2011

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