Publication Type: Conference Paper/Unpublished Manuscript
Abstract: The paper uses panel data from the Survey of Income and Program Participation (SIPP) and the European Community Household Panel (ECHP) to conduct a comparative analysis of the impact of unemployment spells on workers’ subsequent careers in the United States and twelve Western European countries. Using difference-in-difference (DID) propensity score matching, we empirically estimate the causal effect of unemployment on subsequent careers in terms of workers’ employment prospects as well as post-unemployment earnings, and also assess whether the established scar effects are temporary or persistent over time. The cross-national comparison reveals that scarring is more severe in countries undergoing recessions, whereas successful institutional mediation of unemployment scarring occurs through either generous unemployment benefits or strict labor market regulation, but not both.