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Coping with Crises: Policies to Protect Employment and Earnings

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  • Pierella Paci
  • Ana Revenga
  • Bob Rijkers

Abstract

The continuing failure of many countries to adequately mitigate the adverse labor market impacts of economic downturns is of concern, since labor market volatility can exacerbate poverty and stunt growth. This article aims to identify potentially effective policies responses to crises by navigating the potential tradeoffs between offsetting adverse short-term impacts of economic downturns on the quantity and quality of jobs, and preserving incentives for economic recovery. The authors propose a taxonomy that categorizes interventions depending on whether they mitigate the negative short-term impact of crises or whether they stimulate recovery. The taxonomy helps policymakers to identify “win–win” policies that avoid potential tradeoffs between these objectives by simultaneously serving both. Common elements of effective interventions are feasibility, flexibility (for example the capacity for scaling up and down), and incentive compatibility—and there is no substitute for being prepared. Having sound safety nets in place before a crisis is superior to haphazardly implementing responses after a crisis hits. Copyright 2012, Oxford University Press.

Suggested Citation

  • Pierella Paci & Ana Revenga & Bob Rijkers, 2012. "Coping with Crises: Policies to Protect Employment and Earnings," World Bank Research Observer, World Bank Group, vol. 27(1), pages 106-141, February.
  • Handle: RePEc:oup:wbrobs:v:27:y:2012:i:1:p:106-141
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    File URL: http://hdl.handle.net/10.1093/wbro/lkr004
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    Cited by:

    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," American Economic Review, American Economic Association, vol. 99(2), pages 466-472, May.
    2. Nasr, Sahar & Rostom, Ahmed, 2013. "SME contributions to employment, job creation, and growth in the Arab world," Policy Research Working Paper Series 6682, The World Bank.
    3. Mary Hallward-Driemeier & Bob Rijkers, 2013. "Do Crises Catalyze Creative Destruction? Firm-level Evidence from Indonesia," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1788-1810, December.
    4. Leisa Perch, 2012. "Managing Resource-Dependence Amidst Opportunities and Challenges: Defining a New Sustainability Narrative for Caribbean Coastal Economies," Policy Research Brief 36, International Policy Centre for Inclusive Growth.

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