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The Global Economic Crisis: Long-Term Unemployment in the OECD

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  • Junankar, Pramod N. (Raja)

    ()
    (University of New South Wales)

Abstract

This paper analyses the impact of the global economic crisis on unemployment and long term unemployment in the OECD. It uses simple econometric models using panel data (quarterly) and time series data. In general, we find that long term unemployment increases with the unemployment rate, there is persistence in long term unemployment, and that the employment protection variable and the replacement rate are statistically insignificant. Overall, the findings of our research are that there are many differences between the impact of the Great Recession on different countries. Countries that faced a significant financial crisis and a collapse of the housing market bubble have had large increases in unemployment and long term unemployment. There was a big fall in employment in the (especially) construction and manufacturing industries. The financial collapse led to an increase in unemployment in the financial and business sector. As a result of these twin shocks labour mobility of the unemployed is likely to be affected: with negative equity in housing, unemployed workers are unlikely to move regionally. With a loss of wealth (in housing and financial assets, including superannuation) there will be a fall in consumer spending which will slow down the recovery of economies. This means that, especially for some countries, there will be a long period of high unemployment and long term unemployment.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6057.

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Length: 87 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:iza:izadps:dp6057

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Keywords: long-term unemployment; global crisis; labour market policies; OECD;

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References

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  1. Imbens, Guido W. & Wooldridge, Jeffrey M., 2008. "Recent Developments in the Econometrics of Program Evaluation," IZA Discussion Papers 3640, Institute for the Study of Labor (IZA).
  2. Woodbury, Stephen A & Spiegelman, Robert G, 1987. "Bonuses to Workers and Employers to Reduce Unemployment: Randomized Trials in Illinois," American Economic Review, American Economic Association, vol. 77(4), pages 513-30, September.
  3. John P. Martin, 1998. "What Works Among Active Labour Market Policies: Evidence From OECD Countries' Experiences," OECD Labour Market and Social Policy Occasional Papers 35, OECD Publishing.
  4. Junankar, P.N. & Madsen, J.B., 1996. "Unemployment in the OECD: models and mysteries," Discussion Paper Series In Economics And Econometrics 9648, Economics Division, School of Social Sciences, University of Southampton.
  5. David Card & Jochen Kluve & Andrea Weber, 2010. "Active Labour Market Policy Evaluations: A Meta-Analysis," Economic Journal, Royal Economic Society, vol. 120(548), pages F452-F477, November.
  6. Michael W. Elsby & Bart Hobijn & Aysegul Sahin, 2010. "The Labor Market in the Great Recession," NBER Working Papers 15979, National Bureau of Economic Research, Inc.
  7. Stéphanie Guichard & Elena Rusticelli, 2010. "Assessing the Impact of the Financial Crisis on Structural Unemployment in OECD Countries," OECD Economics Department Working Papers 767, OECD Publishing.
  8. Gamberoni, Elisa & von Uexkull, Erik & Weber, Sebastian, 2010. "The role of openness and labour market institutions for employment dynamics during economic crises," ILO Working Papers 461897, International Labour Organization.
  9. Kenneth A. Couch & Dana W. Placzek, 2010. "Earnings Losses of Displaced Workers Revisited," American Economic Review, American Economic Association, vol. 100(1), pages 572-89, March.
  10. Haskel, Jonathan & Jackman, Richard, 1988. "Long-term Unemployment in Britain and the Effects of the Community Programme," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 50(4), pages 379-408, November.
  11. Daniel Aaronson & Bhashkar Mazumder & Shani Schechter, 2010. "What is behind the rise in long-term unemployment?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 28-51.
  12. Junankar, P.N. & Kapuscinski, C.A., 1991. "The Incidence of Long Term Unemployment in Australia," CEPR Discussion Papers 249, Centre for Economic Policy Research, Research School of Economics, Australian National University.
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Cited by:
  1. Geoff C. Harcourt & Peter Kriesler & John Nevilet, 2013. "Why myths in neoclassical economics threaten the world economy: a post-Keynesian Manifesto," Discussion Papers 2013-36, School of Economics, The University of New South Wales.

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