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The labor market effects of financial crises : the role of temporary contracts in central and western Europe

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  • Sharma,Siddharth
  • Winkler,Hernan Jorge

Abstract

This paper examines how the 2008-09 financial crisis affected labor markets in Central and Western Europe, and how this impact depended on employment protections laws. Using a differences-in-differences approach that compares industries with varying degrees of inherent dependence on external financing, the analysis finds that the crisis had significant negative impacts on employment, particularly on temporary, less skilled, and younger workers. These impacts on the level and composition of employment were significantly stronger in countries with stronger legal protection of permanent workers from dismissal. This finding suggests that, given regulatory inflexibility in adjusting the permanent workforce, firms responded to tightening financial constraints by disproportionately laying off temporary workers (who tend to be younger and less skilled than permanent workers).

Suggested Citation

  • Sharma,Siddharth & Winkler,Hernan Jorge, 2017. "The labor market effects of financial crises : the role of temporary contracts in central and western Europe," Policy Research Working Paper Series 8085, The World Bank.
    • Handle: RePEc:wbk:wbrwps:8085
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    Cited by:

    1. Jesus Ferreiro & Carmen Gómez, 2018. "Employment protection and labour market performance in European Union countries during the Great Recession," FMM Working Paper 31-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. Arestis, Philip & Ferreiro, Jesus & Gomez, Carmen, 2023. "Does employment protection legislation affect employment and unemployment?11We acknowledge the comments of an editor and an associate editor of the journal and three reviewers. Their suggestions and recommendations were extremely helpful in improving," Economic Modelling, Elsevier, vol. 126(C).
    3. García-Vega, María & Gupta, Apoorva & Kneller, Richard, 2023. "Is acquisition-FDI during an economic crisis detrimental for domestic innovation?," DICE Discussion Papers 403, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Bussolo,Maurizio & Kotia,Ananya & Sharma,Siddharth, 2021. "Workers at Risk : Panel Data Evidence on the COVID-19 Labor Market Crisis in India," Policy Research Working Paper Series 9584, The World Bank.
    5. Arestis, Philip & Ferreiro, Jesus & Gómez, Carmen, 2020. "Quality of employment and employment protection. Effects of employment protection on temporary and permanent employment," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 180-188.
    6. Apoorva Gupta, 2019. "R&D and firm resilience during bad times," Discussion Papers 2019-12, University of Nottingham, GEP.
    7. Jesus Ferreiro & Carmen Gomez, 2020. "Employment protection and labor market results in Europe," Journal of Evolutionary Economics, Springer, vol. 30(2), pages 401-449, April.
    8. Giannellis, Nikolaos & Tzanaki, Maria-Anna, 2025. "Macroeconomic responses to financial stress shocks: Evidence from the US and the Eurozone," International Economics, Elsevier, vol. 181(C).
    9. Gupta, Apoorva, 2020. "R&D and firm resilience during bad times," DICE Discussion Papers 352, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    10. Vincent FROMENTIN & Joris MICHEL & Sylvain WEBER, 2021. "L’effet des fluctuations financières sur le nombre de travailleurs frontaliers : une analyse comparative du Luxembourg et de la Suisse," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 53, pages 51-68.
    11. Jesus Ferreiro & Carmen Gomez, 2022. "Employment protection, employment and unemployment rates in European Union countries during the Great Recession," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 25(3), pages 240-258, July.

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