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Economic shocks and labor market flexibility

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  • Franklin, Simon
  • Labonne, Julien

Abstract

We test how labor markets adjust to large, but temporary, economic shocks in a context in which such shocks are common. Using an individual-level panel, from 1,140 Philippine municipalities over 26 quarters, we find that workers in areas affected by strong typhoons experience reductions in hours worked and hourly wages, without evidence of layoffs. The results are strongest for formal, wagepaying jobs. We argue that those results are best explained by implicit contracts where workers and firms share risks. We provide extensive qualitative data suggesting that employment contracts in the Philippines allow for such flexibility.

Suggested Citation

  • Franklin, Simon & Labonne, Julien, 2019. "Economic shocks and labor market flexibility," LSE Research Online Documents on Economics 87937, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:87937
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    File URL: http://eprints.lse.ac.uk/87937/
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    References listed on IDEAS

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    Cited by:

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    2. Parag Mahajan & Dean Yang, 2020. "Taken by Storm: Hurricanes, Migrant Networks, and US Immigration," American Economic Journal: Applied Economics, American Economic Association, vol. 12(2), pages 250-277, April.
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    4. Jaqueline Oliveira & Bruno Palialol & Paula Pereda, 2021. "Do temperature shocks affect non-agriculture wages in Brazil? Evidence from individual-level panel data," Working Papers, Department of Economics 2021_13, University of São Paulo (FEA-USP).
    5. Josiah Hickson & Joseph Marshan, 2022. "Labour Market Effects of Bushfires and Floods in Australia: A Gendered Perspective," The Economic Record, The Economic Society of Australia, vol. 98(S1), pages 1-23, September.

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    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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