Journal of Applied Economics (Dec 2022)

The effects of contract-type mismatch and matching frictions on unemployment duration: evidence for Portugal

  • Antonio Menezes,
  • Dario Sciulli

DOI
https://doi.org/10.1080/15140326.2022.2084687
Journal volume & issue
Vol. 25, no. 1
pp. 936 – 961

Abstract

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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 contract-type mismatch between jobseekers who prefer 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 86 local labour markets (job-centers of the Portuguese Public Employment System) and five years. 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 and longer unemployment duration. Improving the desirability of temporary contracts and information about local contract-type mismatch rates may reduce matching frictions and average unemployment duration.

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