Catastrophic Job Destruction

38 Pages Posted: 26 Oct 2013

See all articles by Anabela Jesus Moreira Carneiro

Anabela Jesus Moreira Carneiro

Universidade do Porto - Faculdade de Economia (FEP)

Pedro Portugal

Bank of Portugal - Research Department; New University of Lisbon; IZA Institute of Labor Economics

José Varejão

Universidade do Porto - Faculdade de Economia (FEP)

Abstract

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 explore 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 uncover 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 seems to have favored a stronger job destruction that was facilitated by an increasing number of temporary workers.

Keywords: job destruction, credit constraints, wage rigidity, segmentation

JEL Classification: E24, J23, J63

Suggested Citation

Carneiro, Anabela Jesus Moreira and Portugal, Pedro and Varejão, José, Catastrophic Job Destruction. IZA Discussion Paper No. 7670, Available at SSRN: https://ssrn.com/abstract=2345587

Anabela Jesus Moreira Carneiro (Contact Author)

Universidade do Porto - Faculdade de Economia (FEP) ( email )

Rua Roberto Frias
s/n
Porto, 4200-464
Portugal

Pedro Portugal

Bank of Portugal - Research Department ( email )

Av. Almirante Reis 71, 6th
Lisbon 1150-012
Portugal
+351 21 313 0000 (Phone)
+351 21 814 3841 (Fax)

New University of Lisbon

Lisbon, 1099-085
Portugal

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

José Varejão

Universidade do Porto - Faculdade de Economia (FEP) ( email )

Rua Roberto Frias
s/n
Porto, 4200-464
Portugal

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
23
Abstract Views
1,074
PlumX Metrics