The Fall in Consumption from Being Unemployed in Spain and Portugal

In Portugal real wage flexibility, at the macroeconomic level, is noticeably higher, while unemployment duration is lower, when compared to Spain. This suggests that the hardship of being unemployed is higher in Portugal. Unemployment benefits and family insurance, which are the main buffer against unemployment and have played different roles in both countries, can explain this disparity. In this chapter we present some estimates of the loss of consumption suffered by unemployed workers relative to employed workers in Spain and Portugal. The estimates come from comparable data sets (cross-sections of the Household Budget Surveys). Our results confirm our prior findings: this loss is much more sizeable in Portugal.