Economic Crises and Unemployment Persistence: Analysis of Job Losses During the Finnish 1990s Recession

Abstract

This study estimates the effect of job loss for Finnish workers displaced during a severe recession in the early 1990s. The setting provides a sample of workers of which over 90% experienced unemployment after losing a job due to plant closure. We use linked employer-employee data to follow these workers up to 16 years after the job loss and to construct a closely matched comparison group of non-displaced workers. We estimate over 58% initial drop in employment and earnings after the job loss. At the end of follow-up, women's employment and earnings recover fully while men's employment remains 1–5% lower relative to the comparison groups and they suffer a 5–8% earnings loss. We also find large effects on long-term unemployment that diminish slowly and long-lasting effects on poverty risk.