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Banking crises, labor reforms, and unemployment

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

Abstract

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.

Suggested Citation

  • Bernal-Verdugo, Lorenzo E. & Furceri, Davide & Guillaume, Dominique, 2013. "Banking crises, labor reforms, and unemployment," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1202-1219.
  • Handle: RePEc:eee:jcecon:v:41:y:2013:i:4:p:1202-1219 DOI: 10.1016/j.jce.2013.03.001
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    Cited by:

    1. Blanton, Robert G. & Blanton, Shannon Lindsey & Peksen, Dursun, 2015. "Financial Crises and Labor: Does Tight Money Loosen Labor Rights?," World Development, Elsevier, vol. 76(C), pages 1-12.
    2. repec:eee:deveco:v:130:y:2018:i:c:p:127-144 is not listed on IDEAS
    3. Aleksynska, Mariya, 2015. "Banking crises, labour reforms, and unemployment: a comment," Journal of Comparative Economics, Elsevier, pages 1135-1141.
    4. Boele Bonthuis & Valerie Jarvis & Juuso Vanhala, 2016. "Shifts in euro area Beveridge curves and their determinants," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-17, December.
    5. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," American Economic Review, American Economic Association, pages 466-472.
    6. repec:ilo:ilowps:485452 is not listed on IDEAS
    7. Kapelko, Magdalena & Oude Lansink, Alfons & Stefanou, Spiro E., 2015. "Analyzing the impact of investment spikes on dynamic productivity growth," Omega, Elsevier, vol. 54(C), pages 116-124.
    8. Aleksynska, Mariya. & Cazes, Sandrine., 2014. "Comparing indicators of labour market regulations across databases : a post scriptum to the employing workers debate," ILO Working Papers 994854523402676, International Labour Organization.
    9. Davide Furceri & Prakash Loungani, 2015. "Capital Account Liberalization and Inequality," IMF Working Papers 15/243, International Monetary Fund.
    10. Bernal-Verdugo, Lorenzo E. & Furceri, Davide & Guillaume, Dominique, 2015. "A reply to “banking crises, labor reforms, and unemployment: A comment”," Journal of Comparative Economics, Elsevier, pages 1142-1147.

    More about this item

    Keywords

    Labor market; Unemployment; Reforms; Banking crises;

    JEL classification:

    • E29 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Other
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D7 - Microeconomics - - Analysis of Collective Decision-Making

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