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

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  • Hartmut Lehmann
  • Tiziano Razzolini
  • Anzelika Zaiceva

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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 have 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

  • Hartmut Lehmann & Tiziano Razzolini & Anzelika Zaiceva, 2016. "Worker flows and Labour Market Adjustment during the Great Recession:Evidence from a Large Shock," Center for Economic Research (RECent) 118, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
  • Handle: RePEc:mod:recent:118
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    References listed on IDEAS

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    1. Lehmann, Hartmut & Pignatti, Norberto, 2007. "Informal Employment Relationships and Labor Market Segmentation in Transition Economies: Evidence from Ukraine," IZA Discussion Papers 3269, Institute for the Study of Labor (IZA).
    2. Brücker, Herbert & Bertoli, Simone & Fernández-Huertas Moraga, Jesús, 2013. "The European Crisis and Migration to Germany: Expectations and the Diversion of Migration Flows," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79693, Verein für Socialpolitik / German Economic Association.
    3. Ludmila Fadejeva & Olegs Krasnopjorovs, 2015. "Labour market adjustment during 2008-2013 in Latvia: firm level evidence," Working Papers 2015/02, Latvijas Banka.
    4. Elsner, Benjamin, 2013. "Emigration and wages: The EU enlargement experiment," Journal of International Economics, Elsevier, vol. 91(1), pages 154-163.
    5. Benjamin Elsner, 2013. "Does emigration benefit the stayers? Evidence from EU enlargement," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(2), pages 531-553, April.
    6. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    7. Kim B. Clark & Lawrence H. Summers, 1979. "Labor Market Dynamics and Unemployemnt: A Reconsideration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1), pages 13-72.
    8. Bellmann Lutz & Estrin Saul & Lehmann Hartmut & Wadsworth Jonathan, 1995. "The Eastern German Labor Market in Transition: Gross Flow Estimates from Panel Data," Journal of Comparative Economics, Elsevier, vol. 20(2), pages 139-170, April.
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    10. Elsner, Benjamin & Zimmermann, Klaus F., 2013. "10 Years After: EU Enlargement, Closed Borders, and Migration to Germany," IZA Discussion Papers 7130, Institute for the Study of Labor (IZA).
    11. Sabirianova, Klara Z., 2002. "The Great Human Capital Reallocation: A Study of Occupational Mobility in Transitional Russia," Journal of Comparative Economics, Elsevier, vol. 30(1), pages 191-217, March.
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    More about this item

    Keywords

    Labour market transitions; job and occupational mobility; Great Recession; Latvia;

    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 - Economic Systems - - Socialist Systems and Transition Economies - - - General
    • P23 - Economic Systems - - Socialist Systems and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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