Crises, Labor Market Policy, and Unemployment

Davide Furceri, Lorenzo E. Bernal-Verdugo and Dominique Guillaume

No 2012/065, IMF Working Papers from International Monetary Fund

Abstract: Using a sample of 97 countries spanning the period 1980?2008, we estimate that financial crises have a large negative impact on unemployment in the short term, but that this effect rapidly disappears in the medium term in countries with flexible labor market institutions, whereas the impact of financial crises is less pronounced but more persistent in countries with more rigid labor market institutions. These effects are even larger for youth unemployment in the short term and long-term unemployment in the medium term. Conversely, large upfront, or gradual but significant, comprehensive labor market policies have a positive impact on unemployment, albeit only in the medium term.

Keywords: WP; Labor market; flexibility; unemployment; reforms; financial crises; unemployment outcome; youth unemployment; flexibility indicator; medium term; labor market resilience; labor market indicator; resilience to financial crises; Unemployment; Labor market flexibility; Labor market institutions; Labor market policy; Labor markets; Middle East; North Africa; Central and Eastern Europe; Sub-Saharan Africa; East Africa (search for similar items in EconPapers)
Pages: 29
Date: 2012-03-01
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Citations: View citations in EconPapers (33)

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