Crises, Labor Market Policy, and Unemployment
IMF Working Papers, March 1, 2012
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Bibliographic details
- Authors: Davide Furceri, Lorenzo E. Bernal-Verdugo, Dominique M. Guillaume
- Published: March 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463938420.001
Summary findings
- Using a sample of 97 countries spanning the period 1980?2008, financial crises have a large negative impact on unemployment in the short term.
- In the medium term, the negative short-term effect of financial crises rapidly disappears in countries with flexible labor market institutions.
- In countries with more rigid labor market institutions, the impact of financial crises is less pronounced in the short term but more persistent in the medium term.
- Large upfront, or gradual but significant, comprehensive labor market policies have a positive impact on unemployment, albeit only in the medium term.
Differential impacts by labor market flexibility
- Flexible labor market institutions:
- Large short-term negative effect of financial crises on unemployment.
- Rapid disappearance of that negative effect in the medium term.
- Rigid labor market institutions:
- Less pronounced short-term impact of financial crises on unemployment.
- More persistent negative impact in the medium term.
Groups with amplified effects
- Youth unemployment:
- Effects of financial crises are even larger in the short term.
- Long-term unemployment:
- Effects of financial crises are larger in the medium term.
Labor market policy effects
- Comprehensive labor market policies that are implemented either as large upfront measures or gradually but significantly:
- Have a positive impact on unemployment outcomes.
- This positive impact is observed only in the medium term.
Methodology and scope
- Sample: 97 countries.
- Time period covered: 1980?2008.