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Labor Market Flexibility and the Impact of the Financial Crisis

  • I Kadek Dian Sutrisna Artha
  • Jakob de Haan

The impact of the global financial crisis varies across countries. We examine whether cross-country differences in output loss and speed of recovery are affected by differences in labor market flexibility. By employing cross-country regressions and including control variables like trade and capital market integration, fiscal balance, financial vulnerability, and institutional differences, we find that lower hiring cost reduce the output loss, notably so in high-income countries. However, the duration of the crisis is longer in case of low dismissal cost, notably so in low-income countries.

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File URL: http://hdl.handle.net/10.1111/j.1467-6435.2011.00503.x
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Article provided by Wiley Blackwell in its journal Kyklos.

Volume (Year): 64 (2011)
Issue (Month): 2 (05)
Pages: 213-230

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Handle: RePEc:bla:kyklos:v:64:y:2011:i:2:p:213-230
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  1. Andrew K. Rose & Mark M. Spiegel, 2009. "Cross-country causes and consequences of the 2008 crisis: international linkages and American exposure," Working Paper Series 2009-18, Federal Reserve Bank of San Francisco.
  2. Berkmen, S. Pelin & Gelos, Gaston & Rennhack, Robert & Walsh, James P., 2012. "The global financial crisis: Explaining cross-country differences in the output impact," Journal of International Money and Finance, Elsevier, vol. 31(1), pages 42-59.
  3. Erik Berglof & Yevgeniya Korniyenko & Alexander Plekhanov & Jeromin Zettelmeyer, 2010. "Understanding the Crisis in Emerging Europe," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 6(6), pages 985-1008, September.
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  5. Ronald Heijmans & Richard Heuver & Dani´┐Żlle Walraven, 2011. "Monitoring the unsecured interbank money market using TARGET2 data," DNB Working Papers 276, Netherlands Central Bank, Research Department.
  6. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  7. John B. Taylor, 2009. "The Financial Crisis and the Policy Responses: An Empirical Analysis of What Went Wrong," NBER Working Papers 14631, National Bureau of Economic Research, Inc.
  8. Horst Feldmann, 2003. "Labor Market Regulation and Labor Market Performance: Evidence Based on Surveys among Senior Business Executives," Kyklos, Wiley Blackwell, vol. 56(4), pages 509-540, November.
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  10. Hans Pitlik, 2007. "The Impact of Growth Performance and Political Regime Type on Economic Policy Liberalization," WIFO Working Papers 300, WIFO.
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