Abstract
This paper estimates conventional linear models to evaluate whether the average growth rate of employment (permanent, temporary, and total) over early expansions depends on the characteristics of prior recessions for the Mexican states during the 2001 and 2008 recessions. After controlling for the initial impulse of external and fiscal shocks as well as for the effects of structural factors, our results suggest that the depth and steepness of prior recessions (measured as the percentage accumulated drop and monthly average growth rate) have negative effects on employment growth over the first 9 and 12 months following the 2001 recession. In contrast, employment growth in the aftermath of the 2008 recession can be explained primarily by external and fiscal shocks. In general, the duration of recessionshas no effect on employment growth after recessions.
Highlights
The severity and worldwide spread of the Great Recession, as well as the weakness and uncertainty of the current world recovery, have called the attention of researchers to the dynamics of business cycle regimes
There may be multiple factors conditioning the dynamics of expansions, a branch of the literature has focused on the analysis of economic activity over their initial stages
Of interest, whilst its relevance has been proved by the fact that it yields turning points very close to those defined by the National Bureau of Economic Research (NBER) for the U.S economy (Artis et al, 1997)
Summary
The severity and worldwide spread of the Great Recession, as well as the weakness and uncertainty of the current world recovery, have called the attention of researchers to the dynamics of business cycle regimes. Bordo and Haubrich (2012) study the effects of residential investment in the case of the U.S Elwell (2013) investigates the causes of the weakness of private spending, while Abiad et al (2009) focuses on the role of impaired financial systems and external imbalances in several economies. In their view, the dynamics of this process can be thought of as a self-corrective response to low economic activity and, as an endogenous response of the system. The dynamics of this process can be thought of as a self-corrective response to low economic activity and, as an endogenous response of the system This relationship is commonly referred to as the “bounce-back” effect
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