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Worker Flows and Labour Market Adjustment during the Great Recession: Evidence from a Large Shock

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  • H. Lehmann
  • T. Razzolini
  • A. Zaiceva

Abstract

This paper analyzes how the labor market adjusts to the Great Recession. To this aim, we use the data for Latvia, a country that has experienced one of the most severe recessions in Europe and a subsequent remarkable recovery. Employing longitudinal EU SILC data and a panel data set constructed by us from various waves of the Latvian Labour Force Survey (LLFS), we estimate worker transitions between labor market states. Labor market adjustment takes place predominantly at the extensive margin since it is driven by flows from permanent wage employment to unemployment. We also show that older, non-Latvian and above all less skilled workers are especially hard hit by the economic crisis. Estimated transitions between four mutually exclusive occupational groups demonstrate that downward mobility is very limited even during the Great Recession. Finally, wage regressions suggest that job mobility is not associated with increased labour productivity during and immediately after the crisis.

Suggested Citation

  • H. Lehmann & T. Razzolini & A. Zaiceva, 2016. "Worker Flows and Labour Market Adjustment during the Great Recession: Evidence from a Large Shock," Working Papers wp1049, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp1049
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    2. Hazans, Mihails & Pluta, Anna, 2017. "An in-depth analysis of the impact of reforms on inequality – Latvia," MPRA Paper 118598, University Library of Munich, Germany.
    3. Hartmut Lehmann & Tiziano Razzolini & Anzelika Zaiceva, 2020. "The Great Recession and Labor Market Adjustment: Evidence from Latvia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(1), pages 149-181, March.

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    More about this item

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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