The Great Recession was not so great

Abstract

The Great Recession is characterized by a GDP decline that was unprecedented in the past decades. This paper discusses the implications of the Great Recession analyzing labor market data from 20 OECD countries. Comparing the Great Recession with the 1980s recession it is concluded that there is a high cross-country correlation of the unemployment rates over the two recessions indicating that some labor markets are more vulnerable to fluctuations in economic growth than others. Young workers are the most affected by the Great Recession both in terms of unemployment rates as well as employment rates. For prime age workers employment rates were also affected but for older workers the Great Recession did not have a large impact. To analyze how economic growth and labor market institutions have affected unemployment two types of models are estimated. The main conclusion is rather straightforward and has a "one size fits all" character: to reduce unemployment and create jobs economic growth is needed.