Working Paper: CEPR ID: DP9525
Authors: Daria Anosova; Konstantin Sonin; Alf Vanags; Anna Zasova
Abstract: In terms of output decline and increase in unemployment, the economic recession in Latvia that started during the 2008-09 financial crisis was one of the most severe in the world. Using both decomposition of the unemployment rate into structural and cyclical components and Mortensen and Pissarides? search and matching approach, we demonstrate that the changes in unemployment should be attributed primarily to cyclical, rather than structural factors; as of 2013, a large share of Latvian unemployment is still cyclical. Our results provide important implications for anti-crisis policy in Latvia and elsewhere in the world: the surge in unemployment was largely a consequence of Latvia?s austerity policy.
Keywords: Beveridge Curve; Cyclical Unemployment; Labour Market Matching; Structural Unemployment
JEL Codes: E24; J60
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cyclical factors (E32) | increase in unemployment (J64) |
| structural factors (L10) | increase in unemployment (J64) |
| labor market mismatch (J68) | efficiency of labor market matching (J68) |
| Beveridge curve (J69) | structural unemployment (J64) |