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Scars of recession: the long-term costs of the Finnish economic crisis

Author

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  • Verho, Jouko

    () (Department of Economics, University of Helsinki)

Abstract

This study evaluates the long-term cost of unemployment in Finland by focusing on the deep recession period of the early 1990s. The number of plant closures increased sharply during the recession and the unemployment rate rose by more than 13 percentage points. In the analysis, prime working-age men who face unemployment due to plant closure are matched to those who remained employed during the recession. The average effect of being unemployed during the recession is estimated for a 6 year follow-up period. After 6 years, there is a 25% annual earnings penalty for being unemployed. Months in employment recover steadily after the recession but are still 10% lower after 6 years. The estimated wage loss is 14%.

Suggested Citation

  • Verho, Jouko, 2008. "Scars of recession: the long-term costs of the Finnish economic crisis," Working Paper Series 2008:9, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  • Handle: RePEc:hhs:ifauwp:2008_009
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    File URL: http://www.ifau.se/upload/pdf/se/2008/wp08-09.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Verho, Jouko, 2017. "Economic crises and unemployment persistence: Analysis of job losses during the Finnish 1990s recession," Working Papers 99, VATT Institute for Economic Research.
    2. Kristiina Huttunen & Jenni Kellokumpu, 2016. "The Effect of Job Displacement on Couples' Fertility Decisions," Journal of Labor Economics, University of Chicago Press, vol. 34(2), pages 403-442.
    3. Nilsen, Øivind Anti & Reiso, Katrine Holm, 2011. "Scarring Effects of Unemployment," IZA Discussion Papers 6198, Institute for the Study of Labor (IZA).
    4. Eliason, Marcus, 2011. "Assistant and auxiliary nurses in crisis times: earnings and employment following public sector job loss in the 1990s," Working Paper Series 2011:1, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    5. Volker Rieke & Gerhard Bosch & Friedrich Hubert Esser & Klaus-Dieter Sohn & Sebastian Czuratis & Felix Rauner & Günter Lambertz, 2013. "Duale Ausbildung, ›Jugendgarantie‹ oder zusätzliche Hilfsfonds: Was tun gegen die Jugendarbeitslosigkeit in Europa?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 66(16), pages 03-24, August.

    More about this item

    Keywords

    Unemployment; plant closings;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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