Market Flexibility and the Impact of the Financial Crisis

27 Pages Posted: 28 Oct 2011

See all articles by I. Kadek Dian Sutrisna Artha

I. Kadek Dian Sutrisna Artha

affiliation not provided to SSRN

Jakob de Haan

University of Groningen - Faculty of Economics and Business; CESifo (Center for Economic Studies and Ifo Institute); De Nederlandsche Bank

Date Written: February 1, 2011

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.

Keywords: labor market flexibility, output loss, financial crisis

JEL Classification: E32; E65

Suggested Citation

Kadek Dian Sutrisna Artha, I. and de Haan, Jakob, Market Flexibility and the Impact of the Financial Crisis (February 1, 2011). De Nederlandsche Bank Working Paper No. 280, Available at SSRN: https://ssrn.com/abstract=1950586 or http://dx.doi.org/10.2139/ssrn.1950586

I. Kadek Dian Sutrisna Artha (Contact Author)

affiliation not provided to SSRN

Jakob De Haan

University of Groningen - Faculty of Economics and Business ( email )

PO Box 800
Groningen, 9700 AV
Netherlands
+31 0 50 3633706 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

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De Nederlandsche Bank ( email )

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