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Market Flexibility and the Impact of the Financial CrisisI. Kadek Dian Sutrisna Arthaaffiliation not provided to SSRN Jakob De HaanUniversity of Groningen - Faculty of Economics and Business; De Nederlandsche Bank; CESifo (Center for Economic Studies and Ifo Institute for Economic Research) February 1, 2011 De Nederlandsche Bank Working Paper No. 280 Abstract: The impact of the global financial crisis varies across countries. We examine whether cross-country differences in output loss and speed of recovery are affected by differences in labor market flexibility. By employing cross-country regressions and including control variables like trade and capital market integration, fiscal balance, financial vulnerability, and institutional differences, we find that lower hiring cost reduce the output loss, notably so in high-income countries. However, the duration of the crisis is longer in case of low dismissal cost, notably so in low-income countries.
Number of Pages in PDF File: 27 Keywords: labor market flexibility, output loss, financial crisis JEL Classification: E32; E65 working papers seriesDate posted: October 28, 2011Suggested CitationContact Information
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