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The Great Recession and Labor Market Adjustment: Evidence from Latvia

Author

Listed:
  • Hartmut Lehmann

    (University of Bologna
    NRU Higher School of Economics and IZA
    IZA)

  • Tiziano Razzolini

    (IZA
    University of Siena)

  • Anzelika Zaiceva

    (IZA
    University of Modena and Reggio Emilia)

Abstract

How severe are costs to workers when the economy undergoes a large recession? In this paper, we try to provide an answer to this question using as an example Latvia, a new EU member state, which faced the most severe recession in Europe and globally in 2008. We employ individual-level Latvian Labor Force Survey and EU SILC data over the years 2002–2016 and 2007–2015, respectively, and analyze transitions in the labor market and their determinants as well as occupational mobility. Our results show that adjustment takes place predominantly at the extensive margin since it is driven by flows to unemployment. We also show that by 2016 the labor market has bounced back to its pre-crisis performance and that for the average worker Latvia’s macroeconomic policies that focused on internal devaluation did not impose large costs in the medium run. However, the young, ethnic minorities and the less skilled were particularly affected by the crisis. Wage regressions suggest that job mobility is not associated with an increase in wages, i.e., with increased labor productivity.

Suggested Citation

  • Hartmut Lehmann & Tiziano Razzolini & Anzelika Zaiceva, 2020. "The Great Recession and Labor Market Adjustment: Evidence from Latvia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(1), pages 149-181, March.
    • Handle: RePEc:pal:compes:v:62:y:2020:i:1:d:10.1057_s41294-019-00106-y
    DOI: 10.1057/s41294-019-00106-y
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Unemployment; Labor market flows; Latvia; Crisis;
    All these keywords.

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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