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This paper investigates the effect of unemployment on earnings for ten European countries. Using a harmonised database (ECHP), the authors estimate the impact of declared unemployment on individuals while taking account of attrition and unobserved individual heterogeneity. They find that the unemployment effect differs by country and gender. The wage penalty is greater for men than for women. It is also higher in the more flexible economies. They suggest that labour market institutions such as unemployment benefits and wage-setting institutions may be avenues of investigation to explain these differences.
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