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The effects of contract-type mismatch and matching frictions on unemployment duration : evidence for Portugal
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Abstract(s)
This paper analyses the impact of matching frictions in the Portuguese labour market on individual unemployment hazard rates and unemployment durations. The coexistence of permanent contracts and temporary contracts in the Portuguese (dual) labour-market is akin to a matching friction, with a contracttype mismatch between jobseekers who have a strong preference for permanent contracts, whereas firms, in turn, prefer to offer temporary contracts. The paper uses a rich micro dataset which allows to compute a time and space varying contract-type mismatch index, over 85 local labour markets, identified by jobcenters of the Portuguese Public Employment System. Employing discrete time hazard models and a stock-flow matching mechanism, we find that local labour markets with higher contract-type mismatch rates are characterized by lower hazard rates, especially for job-seekers searching for a permanent contract, and higher exit rates via own means instead of via the job-center. Employing a subsample of uncensored spells and regression models, the data show that longer unemployment duration is a price to be paid to hedge against contract mismatch. Improving the desirability of temporary contracts and the information about local contract-type mismatch rates may reduce matching frictions and average unemployment durations due to contract-type mismatch.
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Keywords
Public Policy Unemployment
Pedagogical Context
Citation
Sciulli, Dario; Menezes, António Gomes de (2018). The effects of contract-type mismatch and matching frictions on unemployment duration: evidence for Portugal, “Working Paper Series”, nº 2/18, 33 pp.. Ponta Delgada: Universidade dos Açores, CEEAplA-A.