Labor Market, Financial Crises and Inflation: Jobless and Wageless Recoveries

34 Pages Posted: 20 Oct 2012

See all articles by Guillermo A. Calvo

Guillermo A. Calvo

Columbia University - School of International & Public Affairs (SIPA); National Bureau of Economic Research (NBER)

Fabrizio Coricelli

University of Siena - Department of Political and International Sciences ; Paris School of Economics (PSE); Centre for Economic Policy Research (CEPR)

Pablo Ottonello

University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2012

Abstract

This paper uses a sample of 116 recession episodes in developed and emerging market economies to compare the labor-market recovery during financial crises with that of other recession episodes. It documents two new stylized facts. First, labor-market recovery from financial crises is characterized by either higher unemployment ("jobless recovery") or a lower real wage ("wageless recovery"). Second, inflation determines the type of recovery: low inflation (below 30 percent annual rate) is associated with jobless recovery, while high inflation is associated with wageless recovery. The paper shows that this pattern of labor recovery from financial crises is consistent with a simple model in which collateral requirements are higher (lower) when a larger share of labor costs (physical capital expenditure) is involved in a loan contract.

Suggested Citation

Calvo, Guillermo A. and Coricelli, Fabrizio and Ottonello, Pablo, Labor Market, Financial Crises and Inflation: Jobless and Wageless Recoveries (October 2012). NBER Working Paper No. w18480, Available at SSRN: https://ssrn.com/abstract=2164604

Guillermo A. Calvo (Contact Author)

Columbia University - School of International & Public Affairs (SIPA) ( email )

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National Bureau of Economic Research (NBER) ( email )

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Fabrizio Coricelli

University of Siena - Department of Political and International Sciences ( email )

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Paris School of Economics (PSE)

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Centre for Economic Policy Research (CEPR)

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Pablo Ottonello

University of Michigan at Ann Arbor - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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