Making ends meet and the exit from unemployment.

This paper investigates the effect of the ability to make ends meet on the duration of unemployment around the Great Recession. Our thought experiment can be summarised as follows: we are in steady-state. What happens to the duration of unemployment if we put some people into financial distress? Do these persons get out of unemployment faster? Is the change in odds of getting re-employed constant over the duration of unemployment? Does this effect vary with the outside environment, for instance, with the local labour market, the socio-economic circumstances in a particular country, the business cycle, etc.? Did the Great Recession make a difference regarding the outcomes. Methodologically, our study follows a discrete time duration approach as proposed by Jenkins (1995) in order to estimate re-employment hazards. The control variables we use consider those previously proposed in the literature. We also attempt to address potential endogeneity by lagging our distress variable, the ability to make ends meet. Overall, our contribution is the large scale of data of EU-SILC during the years before and after 2008. Other than most previous studies, we attempt to find the causal impact of distress on unemployment duration including the role of the Great Recession in thisframework. Our results suggest that financially distressed people get out of unemployment slower than those not in distress, but this effect changes over the course of unemployment. In particular, our findings can be summarised as follows: 1. Distressed people get out of unemployment slower in general than those not in distress. 2. The Great Recession decreases re-employment probabilities for both, distressed and non-distressed people. 3. With the increasing length of an unemployment spell, distress increases the probability of getting re-employed. This is not so before the fourth month of unemployment. 4. Males are facing lower re-employment probabilities than women. 5. In Mediterranean- and Central and Eastern Europe, survival probabilities in unemployment have generally smaller differentials than in North-west Europe when comparing people having-with those not having problem with making ends meet. [ABSTRACT FROM AUTHOR]