Are women and men equal in the effect of unemployment on future wages? An analysis for employees based on the ECHP

Isabelle Terraz, Université de Strasbourg
Olivia Ekert-Jaffe, Institut National d'Études Démographiques (INED)

This paper investigates the effect of unemployment on men and women’s monthly wages for eight European countries. Using a harmonised database (ECHP), we estimate the impact of declared unemployment on employees while taking account of attrition and unobserved individual heterogeneity. We find sizable unemployment effects. In most of the countries, the wage penalty represents from 4% to 9%, and appears to be even higher in the more flexible economies. In certain countries we do not find any gender differences. This is not the case for Belgium, where the scarring effect is particularly strong for women, and France and Italy, where it is particularly weak. Nevertheless, focusing on women who work full time, there is no gender difference in France. To explain the discrepancies between countries, we suggest that labour market institutions such as unemployment benefits and wage-setting institutions may be avenues of investigation.