The Persistence-Resilience Trade-off in Unemployment: The Role of Labor and Product Market Institutions

Aksoy, Tolga ; Manasse, Paolo (2018) The Persistence-Resilience Trade-off in Unemployment: The Role of Labor and Product Market Institutions. Bologna: Dipartimento di Scienze economiche, p. 29. DOI 10.6092/unibo/amsacta/5853. In: Quaderni - Working Paper DSE (1121). ISSN 2282-6483.
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The “great recession” has affected labor markets in Euro-area countries in very different ways. This chapter documents two important aspects of their response: the impact effect of the recession on the rate of unemployment, and the persistence of high unemployment. We find that countries lie on a trade-off between “resilience” and “persistence”: countries where the rate of unemployment is less affected on impact by output shocks (resilience) typically show higher unemployment persistence. We investigate the role of labor and product market institutions, and find evidence that more protected markets are associated to more resilience at the expense of more persistence. This suggests that implementing front loaded “structural reforms” at times of a fiscal consolidation, as many Southern European countries did during the recent crisis, may foster the rise in unemployment and possibly undermine the political support for the reforms. When we estimate the contribution of product and labor market reforms to the rise of unemployment in Southern Europe, however, we find positive, but relatively small effects that are quickly reversed.

Document type
Monograph (Working Paper)
Aksoy, TolgaYildiz Technical University0000-0003-0833-8543
Manasse, PaoloUniversità di Bologna0000-0002-9238-3584
Structural Reforms, Economic Crisis, Banking Crisis, Labor Market Reforms, Product Market Reforms, Banking Sector Reforms
Deposit date
10 May 2018 11:04
Last modified
22 May 2019 13:38

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