Catastrophic Job Destruction

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 7670

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Labor Demand ; Labor Turnover; Vacancies; Layoffs
• Subject: job destruction ; credit constraints ; wage rigidity ; segmentation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Carneiro, Anabela ; Portugal, Pedro ; Varejão, José
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/90094
• Last update: 10.03.2025, 11:41 AM CET