The effect of financial fragility on employment

Michael Chletsos and Andreas Sintos

Economic Modelling, 2021, vol. 94, issue C, 104-120

Abstract: Financial fragility increases economic uncertainty and restricts credit to firms, leading to lower economic growth and employment. Despite voluminous research on the relation between financial fragility and growth, the effect of financial fragility on employment is understudied. Using a global panel for the period 1998–2017, we identify a negative effect of financial fragility on employment, even after accounting for unobserved country heterogeneity. The impact of financial fragility is stronger in the post-crisis period and in more rigid labor markets, and the magnitude of the effect is higher in developing/emerging economies than in developed countries. Nevertheless, this negative effect can be mitigated in countries with a higher level of financial market development. Our results are robust to the use of several robustness tests, including different measures of financial fragility and an instrumental variables approach.

Keywords: Financial fragility; Employment; Panel data models (search for similar items in EconPapers)
JEL-codes: C2 G1 J21 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999320312013
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:94:y:2021:i:c:p:104-120

DOI: 10.1016/j.econmod.2020.09.017

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().