Labor Market, Financial Crises and Inflation: Jobless and Wageless Recoveries

Guillermo Calvo, Fabrizio Coricelli and Pablo Ottonello

No 18480, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper uses a sample of 116 recession episodes in developed and emerging market economies to compare the labor-market recovery during financial crises with that of other recession episodes. It documents two new stylized facts. First, labor-market recovery from financial crises is characterized by either higher unemployment ("jobless recovery") or a lower real wage ("wageless recovery"). Second, inflation determines the type of recovery: low inflation (below 30 percent annual rate) is associated with jobless recovery, while high inflation is associated with wageless recovery. The paper shows that this pattern of labor recovery from financial crises is consistent with a simple model in which collateral requirements are higher (lower) when a larger share of labor costs (physical capital expenditure) is involved in a loan contract.

JEL-codes: E2 E31 E44 F3 F32 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-mac
Note: IFM
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Citations: View citations in EconPapers (41)

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