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

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).


  • Author

    Sharma,Siddharth, Winkler,Hernan Jorge

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    Policy Research Working Paper

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    Europe and Central Asia,

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

  • Keywords

    credit crunch;financial crisis;trade and competitiveness;temporary worker;high level of employment;private sector credit;dynamic model;permanent worker;Labor Market;older woman;total employment;financial dependence;european free trade association;temporary contract;response to shock;employment protection;employment protection legislation;labor market impact;high skill occupation;high school education;composition of employment;high school graduate;External Finance;migrant worker;labor market outcome;systemic banking crisis;labor market regulation;grounds for dismissal;labor market performance;amount of liability;access to finance;employee credit;lack of credit;fixed effect;Poverty & Inequality;flexible work arrangement;labor force survey;availability of credit;education and gender;labor market surveys;cost of training;share of employment;supply of finance;burden of adjustment;country of residence;contract of employment;urban labor market;global economic slowdown;descriptive statistic;public safety net;impacts on employment;labor market characteristic;list of countries;labor market dynamic;labor market policy;process of harmonization;household survey data;mexican peso crisis;standard error;low-skill occupation;machine operator;foreign nationality;sales worker;financial shock;employment effect;financially dependent;college graduate;credit condition;financial constraint;empirical evidence;labour market;temporary job;job loss;unskilled worker;Young Workers;



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Sharma,Siddharth Winkler,Hernan Jorge

The labor market effects of financial crises : the role of temporary contracts in central and western Europe (English). Policy Research working paper,no. WPS 8085 Washington, D.C. : World Bank Group.