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Economic shocks and labor market flexibility

Franklin, Simon and Labonne, Julien (2019) Economic shocks and labor market flexibility. Journal of Human Resources, 54 (1). 171 - 199. ISSN 0022-166X

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Identification Number: 10.3368/jhr.54.1.0616.8012R1


We test how labor markets adjust to large, but temporary, economic shocks in a context in which such shocks are common. Using an individual-level panel, from 1,140 Philippine municipalities over 26 quarters, we find that workers in areas affected by strong typhoons experience reductions in hours worked and hourly wages, without evidence of layoffs. The results are strongest for formal, wagepaying jobs. We argue that those results are best explained by implicit contracts where workers and firms share risks. We provide extensive qualitative data suggesting that employment contracts in the Philippines allow for such flexibility.

Item Type: Article
Official URL:
Additional Information: © 2019 The Board of Regents of the University of Wisconsin System
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
JEL classification: J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J22 - Time Allocation and Labor Supply
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J30 - General
J - Labor and Demographic Economics > J4 - Particular Labor Markets > J41 - Contracts: Specific Human Capital, Matching Models, Efficiency Wage Models, and Internal Labor Markets
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate; Natural Disasters
Date Deposited: 15 May 2018 09:36
Last Modified: 20 Oct 2021 02:34

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