Boeri, T., Garibaldi, P. & Moen, R. E. (2015) “Labour and finance in the aftermath of the Great Recession“, VoxEU Organisation, 19 Μαρτίου.
The Great Recession sparked the interest in the link between financial conditions and employment. This column describes results from a new model of labour and finance, incorporating financial imperfections and borrowing constraints. The results uncover a complementarity between firms holding cash and labour market imperfections. Firms embedded into better functioning financial sectors are, on average, less inclined to hold cash. In addition, a more financially integrated system would dismiss more labour, explaining the higher increase of unemployment in the US compared to Europe.
New evidence on credit-employment relationship
The 2008 Global Crisis and the associated increase in unemployment on both sides of the Atlantic sparked a new interest in the relationship between financial imperfections and labour market dynamics. In the aftermath of the Crisis, a growing empirical literature has studied the links between financial conditions and employment adjustment. The Great Recession has indicated that firms’ leverage and firms’ access to finance are clearly correlated to hiring and firing decisions. It is now empirically accepted that frictions in bank lending are correlated to employment losses when credit conditions deteriorate (see micro evidence reported by Chodorow-Reich and Bentolila et al. 2014).1 Our recent research (Boeri et al. 2014) confirms these findings.
Σχετικές αναρτήσεις:
- Barslund, M. & Busse, M. (2014) “Making the Most of EU Labour Mobility“, Social welfare policies, CEPS Task Force Reports, 07 Οκτωβρίου.
- Palaiologos, Y. (2014) The 13th Labour of Hercules: Inside the Greek Crisis, Portobello Books Ltd, 04 Σεπτεμβρίου.
- Turrini, A., Koltay, G., Pierini, F., Goffard, C. & Kiss, A. (2014) “European Economy: a Decade of Labour Market Reforms in the EU – Insights from the LABREF Database“, Economic Papers 522, European Commission – Economic and Financial Affairs, Ιούνιος.