Labor Market, Financial Crises and Inflation: Jobless and Wageless Recoveries [report]

Guillermo Calvo, Fabrizio Coricelli, Pablo Ottonello
2012 unpublished
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
more » ... ted 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.
doi:10.3386/w18480 fatcat:tjpn4e4p3vc2dprdrtdld775fa