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Banking crises, labor reforms, and unemployment

  • Bernal-Verdugo, Lorenzo E.
  • Furceri, Davide
  • Guillaume, Dominique

Using a sample of 97 countries spanning the period 1980–2008, we estimate that banking crises have, on average, a large negative impact on unemployment. This effect, however, largely depends on the flexibility of labor market institutions: while in countries with more flexible labor markets the impact of banking crises is sharper but short-lived, in countries with more rigid labor markets the effect is initially more subdued but highly persistent. These effects are even larger for youth unemployment in the short term, and long-term unemployment in the medium term. Conversely, large upfront, or gradual but significant, comprehensive market reforms have a positive impact on unemployment, albeit only in the medium term.

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Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 41 (2013)
Issue (Month): 4 ()
Pages: 1202-1219

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Handle: RePEc:eee:jcecon:v:41:y:2013:i:4:p:1202-1219
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