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Coping with crises : why and how to protect employment and earnings


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  • Paci, Pierella
  • Revenga, Ana
  • Rijkers, Bob


Events of the past two years are a reminder that crises are a recurring phenomenon with deep and often protracted impacts on labor markets. This paper examines the challenges inherent in crafting policy responses, with particular attention to developing countries. It focuses on the potential tradeoffs between offsetting adverse short-term impacts and preserving incentives for economic recovery and future growth, and between protecting the most vulnerable and compensating those most immediately impacted. It also highlights how policymakers’ room for maneuver is constrained in crisis times by deteriorating fiscal space, limited institutional capacity, and mounting political pressures. Based on empirical evidence from previous crises, the paper asserts that taking a myopic and reactive approach may be costly and counterproductive. Instead, it advocates a more comprehensive approach, designed to build institutions - such as automatic stabilizers and safety nets - that can deliver a coordinated and coherent policy package. This approach will make crises catalysts for institutional changes and long-run growth.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5094.

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Date of creation: 01 Oct 2009
Date of revision:
Handle: RePEc:wbk:wbrwps:5094

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Keywords: Labor Markets; Labor Policies; Safety Nets and Transfers; Banks&Banking Reform; Population Policies;

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Cited by:
  1. 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, International Labour Organization 461897, International Labour Organization.
  2. Ambar Narayan & Carolina Sánchez-Páramo, 2012. "Knowing, When You Do Not Know : Simulating the Poverty and Distributional Impacts of an Economic Crisis," World Bank Publications, The World Bank, number 2229, August.
  3. Guimbert, Stephane & Oostendorp, Remco, 2012. "Weathering the storm : responses by Cambodian firms to the global financial crisis," Policy Research Working Paper Series 6220, The World Bank.
  4. Hansen, Ellen & Avila, Zulum, 2012. "Preliminary assessment of training and retraining programmes implemented in response to the Great Recession :," ILO Working Papers, International Labour Organization 468419, International Labour Organization.


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