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Buffering Recessions : Labor Market Asymmetries and the Role of Self-Employment

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  • Loungani,Prakash
  • Emiliano Evaristo Luttini
  • Hayley Marie Pallan

Abstract

The employment structure in emerging markets and developing economies (EMDEs) differs markedly from that in advanced economies, which has implications for adjustment to cyclical conditions. This paper examines the cyclicality of employment in advanced economies and EMDEs. Although EMDEs exhibit a more violent GDP cycle than advanced economies, advanced economies present a steeper and more violent employment cycle. In the short term, an employment composition that is more biased toward self-employment, which is less cyclical, explains about 70 percent of these differences, while in the medium-term it accounts for about 40 percent. These characteristics explain why, during recessions, employment in advanced economies is more sensitive to economic fluctuations than in EMDEs.

Suggested Citation

  • Loungani,Prakash & Emiliano Evaristo Luttini & Hayley Marie Pallan, 2025. "Buffering Recessions : Labor Market Asymmetries and the Role of Self-Employment," Policy Research Working Paper Series 11089, The World Bank.
    • Handle: RePEc:wbk:wbrwps:11089
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