OECD Social, Employment and Migration Working Papers
This series is designed to make available to a wider readership selected labour market, social policy and migration studies prepared for use within the OECD. Authorship is usually collective, but principal writers are named. The papers are generally available only in their original language - English or French - with a summary in the other.
- ISSN: 1815199X (online)
- https://doi.org/10.1787/1815199X
Catastrophic Job Destruction
In this article we study the resilience of the Portuguese labor market, in terms of job flows, employment and wage developments, in the context of the current recession. We single out the huge contribution of job destruction, especially due to the closing of existing firms, to the dramatic decline of total employment and increase of the unemployment rate. We also document the very large increase in the incidence of minimum wage earners and nominal wage freezes. We explored three different channels that may have amplified the employment response to the great recession: the credit channel, the wage rigidity channel, and the labor market segmentation channel. We uncovered what we believe is convincing evidence that the severity of credit constraints played a significant role in the current job destruction process. Wage rigidity is seen to be associated with lower net job creation and higher failure rates of firms. Finally, labor market segmentation seemed to have favored a stronger job destruction that was facilitated by an increasing number of temporary workers
Keywords: credit constraints, segmentation, job destruction, wage rigidities
JEL:
J63: Labor and Demographic Economics / Mobility, Unemployment, Vacancies, and Immigrant Workers / Labor Turnover; Vacancies; Layoffs;
J23: Labor and Demographic Economics / Demand and Supply of Labor / Labor Demand;
E24: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- Click to access:
-
Click to download PDF - 1.30MBPDF
-
Click to Read online and shareREAD