Structural or Cyclical? Unemployment in Latvia Since the 2008-09 Financial Crisis

31 Pages Posted: 2 Jul 2013

See all articles by Daria Anosova

Daria Anosova

New Economic School (NES)

Konstantin Sonin

University of Chicago - Harris School of Public Policy; Higher School of Economics; Centre for Economic Policy Research (CEPR)

Alf Vanags

Baltic International Centre for Economic Policy Studies (BICEPS)

Anna Zasova

Baltic International Centre for Economic Policy Studies (BICEPS)

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Date Written: June 2013

Abstract

In terms of output decline and increase in unemployment, the economic recession in Latvia that started during the 2008-09 financial crisis was one of the most severe in the world. Using both decomposition of the unemployment rate into structural and cyclical components and Mortensen and Pissarides’ search and matching approach, we demonstrate that the changes in unemployment should be attributed primarily to cyclical, rather than structural factors; as of 2013, a large share of Latvian unemployment is still cyclical. Our results provide important implications for anti-crisis policy in Latvia and elsewhere in the world: the surge in unemployment was largely a consequence of Latvia’s austerity policy.

Keywords: Beveridge curve, cyclical unemployment, labour market matching, structural unemployment

JEL Classification: E24, J60

Suggested Citation

Anosova, Daria and Sonin, Konstantin and Vanags, Alf and Zasova, Anna, Structural or Cyclical? Unemployment in Latvia Since the 2008-09 Financial Crisis (June 2013). CEPR Discussion Paper No. DP9525, Available at SSRN: https://ssrn.com/abstract=2288490

Daria Anosova (Contact Author)

New Economic School (NES) ( email )

100A Novaya Street
Moscow, Skolkovo 143026
Russia

Konstantin Sonin

University of Chicago - Harris School of Public Policy ( email )

1155 East 60th Street
Chicago, IL 60637
United States

Higher School of Economics ( email )

20 Myasnitskaya street
Moscow, 119017
Russia

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Alf Vanags

Baltic International Centre for Economic Policy Studies (BICEPS) ( email )

Strelnieku iela 4a
Riga, LV 1010
Latvia

Anna Zasova

Baltic International Centre for Economic Policy Studies (BICEPS) ( email )

Strelnieku iela 4a
Riga, LV 1010
Latvia

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