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Scars of recession: the long-term costs of the Finnish economic crisis

Author

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  • Verho, Jouko

    (Department of Economics, University of Helsinki)

Abstract

This study evaluates the long-term cost of unemployment in Finland by focusing on the deep recession period of the early 1990s. The number of plant closures increased sharply during the recession and the unemployment rate rose by more than 13 percentage points. In the analysis, prime working-age men who face unemployment due to plant closure are matched to those who remained employed during the recession. The average effect of being unemployed during the recession is estimated for a 6 year follow-up period. After 6 years, there is a 25% annual earnings penalty for being unemployed. Months in employment recover steadily after the recession but are still 10% lower after 6 years. The estimated wage loss is 14%.

Suggested Citation

  • Verho, Jouko, 2008. "Scars of recession: the long-term costs of the Finnish economic crisis," Working Paper Series 2008:9, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    • Handle: RePEc:hhs:ifauwp:2008_009
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    References listed on IDEAS

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    Cited by:

    1. Eliason, Marcus, 2011. "Assistant and auxiliary nurses in crisis times: earnings and employment following public sector job loss in the 1990s," Working Paper Series 2011:1, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    2. Nilsen, Øivind A. & Reiso, Katrine Holm, 2011. "Scarring effects of unemployment," Discussion Paper Series in Economics 26/2011, Norwegian School of Economics, Department of Economics.
    3. Kristiina Huttunen & Jenni Kellokumpu, 2016. "The Effect of Job Displacement on Couples' Fertility Decisions," Journal of Labor Economics, University of Chicago Press, vol. 34(2), pages 403-442.
    4. Mattia Filomena, 2021. "Unemployment Scarring Effects: A Symposium On Empirical Literature," Working Papers 453, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    5. Verho, Jouko, 2017. "Economic crises and unemployment persistence: Analysis of job losses during the Finnish 1990s recession," Working Papers 99, VATT Institute for Economic Research.
    6. Volker Rieke & Gerhard Bosch & Friedrich Hubert Esser & Klaus-Dieter Sohn & Sebastian Czuratis & Felix Rauner & Günter Lambertz, 2013. "Dual Vocational Education‚ A Guarantee for “Young People” or an Additional Bail-Out Fund: What Can Be Done About Youth Unemployment in Europe?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 66(16), pages 03-24, August.
    7. Arja Jolkkonen & Pertti Koistinen & Arja Kurvinen & Liudmila Lipiäinen & Tapio Nummi & Pekka Virtanen, 2018. "Labour Market Attachment Following Major Workforce Downsizings: A Comparison of Displaced and Retained Workers," Work, Employment & Society, British Sociological Association, vol. 32(6), pages 992-1010, December.

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    More about this item

    Keywords

    Unemployment; plant closings;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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