STIGMA EFFECTS OF NONEMPLOYMENT

Do longer past spells of nonemployment cause longer future spells? If so, what is the likely cause, stigma or human capital decay? I examine a sample of 10,245 spells of nonemployment experienced by 2,184 young men. After controlling for unobserved heterogeneity, I find an increase in the duration of previous nonemployment lengthens the expected duration of future nonemployment. But the lower was the local unemployment rate when past nonemployment occurred, the larger is this effect. The finding supports the stigma hypothesis that workers who experience nonemployment when proportionately fewer are nonemployed are more severely stigmatized.