Crises, Labor Market Policy, and Unemployment

Author/Editor:

Davide Furceri ; Lorenzo E. Bernal-Verdugo ; Dominique M. Guillaume

Publication Date:

March 1, 2012

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 2012/065

Subject:

Labor Labor market flexibility Labor market institutions Labor market policy Labor markets Unemployment

English

Publication Date:

March 1, 2012

ISBN/ISSN:

9781463938420/1018-5941

Stock No:

WPIEA2012065

Pages:

29

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