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Research ArticleArticle

Economic Shocks and Labor Market Flexibility

Simon Franklin and Julien Labonne
Journal of Human Resources, January 2019, 54 (1) 171-199; DOI: https://doi.org/10.3368/jhr.54.1.0616.8012R1
Simon Franklin
Simon Franklin is Postdoctoral Research Economist at the London School of Economics
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  • For correspondence: [email protected]
Julien Labonne
Julien Labonne is Associate Professor of Economics and Public Policy at the Blavatnik School of Government, University of Oxford
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Abstract

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, wage-paying 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.

JEL Classification
  • J22
  • J30
  • J41
  • Q54
  • Received June 2016.
  • Accepted July 2017.
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Journal of Human Resources: 54 (1)
Journal of Human Resources
Vol. 54, Issue 1
1 Jan 2019
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Economic Shocks and Labor Market Flexibility
Simon Franklin, Julien Labonne
Journal of Human Resources Jan 2019, 54 (1) 171-199; DOI: 10.3368/jhr.54.1.0616.8012R1

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Economic Shocks and Labor Market Flexibility
Simon Franklin, Julien Labonne
Journal of Human Resources Jan 2019, 54 (1) 171-199; DOI: 10.3368/jhr.54.1.0616.8012R1
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  • Article
    • Abstract
    • I. Introduction
    • II. Context and Data
    • III. Main Results
    • IV. Theoretical Framework and Context
    • V. Long-Term Employment Contracts and Downward Wage Flexibility
    • VI. Conclusion
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Keywords

  • J22
  • J30
  • J41
  • Q54
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