Crises, Labor Market Policy, and Unemployment

29 Pages Posted: 25 Mar 2012

See all articles by Lorenzo E. Bernal-Verdugo

Lorenzo E. Bernal-Verdugo

University of Chicago - Booth School of Business - Economics

Davide Furceri

International Monetary Fund (IMF)

Dominique M. Guillaume

Catholic University of Leuven

Date Written: March 2012

Abstract

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.

Keywords: Labor Market, Flexibility, Unemployment, Reforms, Financial Crises, Analysis Of Collective Decision-making

JEL Classification: E29, J60, E32

Suggested Citation

Bernal-Verdugo, Lorenzo E. and Furceri, Davide and Guillaume, Dominique M., Crises, Labor Market Policy, and Unemployment (March 2012). IMF Working Paper No. NO.12/65. Available at SSRN: https://ssrn.com/abstract=2028241

Lorenzo E. Bernal-Verdugo

University of Chicago - Booth School of Business - Economics ( email )

Graduate School of Business
1101 East 58th Street
Chicago, IL 60637
United States

Davide Furceri

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Dominique M. Guillaume

Catholic University of Leuven ( email )

Oude Markt 13
Center for Economic Studies
B-3000 Leuven
Belgium
32 16 32 68 40 (Phone)
32 16 32 67 (Fax)

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