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Labor market rigidity, unemployment, and the Great Recession

Author

Listed:
  • Murat Tasci
  • Mary Zenker

Abstract

Countries with very flexible institutions and labor market policies, like the U.S., experienced substantial increases in unemployment over the course of the Great Recession, while countries with relatively rigid institutions and strict labor market policies, like France, fared better. However, this better short-term performance comes with a tradeoff; evidence suggests that flexible labor markets keep unemployment lower in the long run.

Suggested Citation

  • Murat Tasci & Mary Zenker, 2011. "Labor market rigidity, unemployment, and the Great Recession," Economic Commentary, Federal Reserve Bank of Cleveland, issue June.
    • Handle: RePEc:fip:fedcec:y:2011:i:june29:n:2011-11
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    References listed on IDEAS

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    1. Ohanian, Lee & Raffo, Andrea & Rogerson, Richard, 2008. "Long-term changes in labor supply and taxes: Evidence from OECD countries, 1956-2004," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1353-1362, November.
    2. Olivier Blanchard, 2006. "European unemployment: the evolution of facts and ideas [‘The macroeconomics of low inflation’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 21(45), pages 6-59.
    3. Lars Ljungqvist & Thomas J. Sargent, 2008. "Two Questions about European Unemployment," Econometrica, Econometric Society, vol. 76(1), pages 1-29, January.
    4. Murat Tasci & Saeed Zaman, 2010. "Unemployment after the recession: a new natural rate?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Sep.
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    Cited by:

    1. Pedro S. Amaral, 2012. "Technology shocks and unemployment in the last recession," Economic Commentary, Federal Reserve Bank of Cleveland, issue June.
    2. Mirela Ionela Aceleanu & Andreea Claudia Serban & Cristina Burghelea, 2015. "“Greening” the Youth Employment—A Chance for Sustainable Development," Sustainability, MDPI, vol. 7(3), pages 1-21, March.

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