Great Recession Period Research Articles

PERCEIVED WORKPLACE AGEISM AND OLDER WORKERS’ LABOR FORCE TRANSITIONS DURING THE GREAT RECESSION

Abstract Previous research suggests that workplace ageism increased during the Great Recession (GR). During the GR, despite having lower unemployment rates compared to younger workers, older workers took considerably longer to find jobs once they were unemployed. Yet, no study has investigated the potential role of workplace ageism in older workers’ labor force outcomes. This study examines the role of perceived workplace ageism in older workers’ labor force transitions during the GR using longitudinal data from the Health and Retirement study. I conduct a multi-period analysis and compare how the association of perceived workplace ageism with labor force transitions changed during the GR compared to pre and post-recession periods. Results from multivariate logistic regressions show that only in the GR period, both measures of perceived workplace ageism – pressure to retire before age 65 and preference for young in promotions – were associated with a higher likelihood of employment instability (b= 0.336 p< 0.05 and b= 0.340 p< 0.05), net of demographic, socioeconomic, financial, job-related and health-related factors. Moreover, older workers perceiving workplace were less likely to retire and thereby more likely to be unemployed (b= -0.667 p< 0.05). In contrast, perceived workplace ageism had no association with reducing or increasing the hours worked per week. In sum, this study provided the first individual-level evidence on the impact of perceived workplace ageism on older adults’ labor force transitions during the GR. Findings can be used to motivate additional studies on older workers’ experience during the Covid19 crisis.

The impacts of oil price volatility on financial stress: Is the COVID-19 period different?

This study analyses the effects of oil price volatility on financial stress with various measures for a large panel of countries. The study places a special focus on comparing the pattern of these effects during the Great Recession period and the COVID-19 recession period. Using the local projection approach, the paper finds that oil price volatility has a positive and persistent effect on financial stress. However, the magnitude and the degree of persistency of oil price volatility impacts on financial stress are much greater for the Great Recession period than for the COVID-19 recession period. A possible explanation for this result would be that COVID-19 is better thought of as a “natural disaster” in which companies under stress were not being mismanaged. Another explanation would be that active intervention by the government through monetary and fiscal channels reduces the sensitivity of financial instability to oil price volatility during the COVID-19 period.

Charities’ income during the COVID-19 pandemic: administrative evidence for England and Wales

Abstract This paper provides a detailed overview of how the COVID-19 pandemic has affected the income of charitable organisations – an under-researched theme within social policy, which thus far has largely focused on the impact of the pandemic on individuals’ and households’ wellbeing. It analyses a unique longitudinal dataset that follows through time c.90,000 charities in England and Wales. The results, for the first time, illustrate the scale of the pandemic’s financial impact on the charitable sector: the median charity experienced a 13% real decline in annual income, while a charity at the 25th percentile of the annual relative growth distribution experienced an income decline of 43%. Importantly these annual declines are much more sizeable than those associated with the Great Recession and subsequent period of public spending austerity. Smaller charities, particularly those with an income under £100k, have been most significantly affected. The declines have been pervasive, extending across most fields of charitable activity, though certain charitable fields have seen particularly acute declines. While there has rightly been considerable emphasis on the important role of voluntary action in responding to the pandemic, this new empirical evidence helps to communicate the extent of the recent challenges faced by the charitable sector.

Innovation and the Financial Performance of Firms during the Great Recession and Recovery Period

This study analyzes the relationship between innovation and financial constraints. To this end, a database extracted from the Community Innovation Survey (CIS) and the System of Business Accounts (SCIE) was used. The sample consisted of 24,679 active companies operating in Portugal in the manufacturing and service industry between 2008 and 2016. A Recursive Bivariate Probit Model (RPBM) was used for making estimates. When analyzing the relationship between innovation and financial constraints, the results reveal a negative relationship between the two, confirming that firms that are financially constrained are more limited in their investments in R&D, and innovation is less accessible to them. The severity of the effects of financial constraints is heterogeneous across economic activities, strongly affecting innovative industries, while service industries appear to be the least affected. It was also observed that larger companies are better able to innovate. There was a positive relationship between innovation and the variables sales and exports, indicating that innovation will positively affect the financial results of companies.

How the Great Recession changed class inequality: Evidence from 23 European countries

The question of whether economic recessions increase or decrease the earnings gap between the working and upper-middle class is debated. We study this issue and examine the Great Recession period using two different analytical strategies: three-level multilevel models and multivariate analysis over time. Based on EU Statistics on Income and Living Conditions (EU-SILC) data in 23 countries from 2004 to 2017, our results under both analytical strategies provide robust evidence that, by and large, the Great Recession widened the earnings gap between the working and upper-middle class. The effect magnitude is sizable; an increase of 5 percentage points in the unemployment rate is associated with an increase in the class earnings gap of approximately 0.10 log points.

The dynamics of poverty in Europe: what has changed after the great recession?

This paper provides novel evidence on the importance of the phenomenon of poverty and its heterogeneity across European countries. We analyze the determinants of poverty in Europe and their evolution over time by disentangling the role of genuine state dependence and heterogeneity.We apply alternative dynamic probit models accounting for endogenous initial conditions and correlated random effects to the pre-Great Recession period of 2005–2008 and the post- Great Recession period of 2015–2018 using EU-SILC longitudinal datasets for a sample of European countries in order to estimate genuine state dependence and uncover the role of observable and unobservable factors in determining the risk of poverty. Our findings suggest that the degree of genuine state dependence is relevant in Europe and that it increased slightly from pre- to post-Great Recession. This suggests that measures aimed at lifting individuals out of poverty, including cash transfers, have become even more important during the Europe 2020 decade. Our analysis also reveals that Europe is characterized by an increasing scarring effect of poverty, the trend of which has been exacerbated in the post-recession period. The analysis at the country level clarifies why the evolution of genuine state dependence was heterogeneous. While a clear pattern within macro-regions does not emerge, we find an association between country-level variation in genuine state dependence and some macroeconomic indicators. Finally, our results suggest that the protective role of higher education has diminished over time, while the role of employment stability and of childcare provision during early childhood has become even more important in the post-recession period.

Impact of Great Recession bank failures on use of financial services among racial/ethnic and income groups

AbstractUsing individuals'‐level data from the 2013, 2015, and 2017 unbanked and underbanked household surveys, we examine the effect of the magnitude of bank failures in the 2008–2011 period on individuals' use of financial services in the post Great Recession period. We find the intensity of local bank failure to reduce the probability of owning a bank account and increase the likelihood of using alternative financial services (AFS). We show that those exposed to medium intensity failures were 2.3 percentage points less likely to be fully banked (own a bank account and do not use AFS) and 0.5 percentage points more likely to be unbanked (do not own a bank account and use AFS). These effects are primarily driven by blacks and Hispanics in low and medium intensity Metropolitan Statistical Areas. Our results are explained by the effect that the intensity of bank failures had on branching. Moreover, we find bank failures to intensify impediments to banking due to lack of convenient location and hours and distrust in banks, and the effect is more salient for minorities.

The spatially and temporally varying association between mental illness and substance use mortality and unemployment: A Bayesian analysis in the contiguous United States, 2001–2014

This study examined the spatiotemporally varying association between mental illness and substance use (MISU) mortality and unemployment, which was rarely explored in previous studies. We employed a spatiotemporal Bayesian hierarchical model to examine how the association varies over space and time after controlling eight covariates on county-level socioeconomic status. MISU mortality rates in 3108 counties in the contiguous U.S. between 2001 and 2014, a period including two economic recessions, were analyzed. The results showed that the association between MISU mortality and unemployment was spatially and temporally varying. Three compelling patterns were found: (1) the persistent high association in the rural Appalachian; (2) the rising high association in the Midwest; and (3) nearly all counties showed a weaker association during the Great Recession period than before and after.We provided possible explanations for such patterns as regional contexts including the insufficiency of healthcare facilities and relative deprivation. Our study demonstrated that the association between MISU mortality and unemployment is spatiotemporally different across counties in the U.S., and the paradoxical “benefit” of the economic recession to the effect of unemployment rates on MISU mortality rates. The results also reiterate the need for locally-focused policies for mitigating the impact of unemployment on mortalities.

On the Relationship between Oil and Exchange Rates of Oil-Exporting and Oil-Importing Countries: From the Great Recession Period to the COVID-19 Era

This paper is dedicated to studying and modeling the interdependence between the oil returns and exchange-rate movements of oil-exporting and oil-importing countries. Globally, twelve countries/regions are investigated, representing more than 60% and 67% of all oil exports and imports. The sample period encompasses economic and natural events like the Great Recession period (2007–2009) and the COVID-19 pandemic. We use the dynamic conditional correlation mixed-data sampling (DCC-MIDAS) model, with the aim of investigating the interdependencies expressed by the long-run correlation, which is a smoother (but always daily observed) version of the (daily) time-varying correlation. Focusing on the advent of the COVID-19 pandemic in 2020, the long-run correlations of the oil-exporting countries (Saudia Arabia, Russia, Iraq, Canada, United States, United Arab Emirates, and Nigeria) and (lagged) WTI crude oil returns strongly increase. For a subset of these countries (that is, Saudia Arabia, Iraq, United States, United Arab Emirates, and Nigeria), the (lagged) correlations turn out to be positive, while for Canada and Russia they remain negative as before the advent of the pandemic. In addition, the oil-importing countries and regions under investigation (Europe, China, India, Japan, and South Korea) experience a similar pattern: before the COVID-19 pandemic, the (lagged) correlations were negative for China, India, and South Korea. After the COVID-19 pandemic, the correlations of these latter countries increased.

Great Recession and news shocks: evidence based on an estimated DSGE model

This paper examines whether productivity news shocks were among the drivers of the Great Recession. To do this, the Smets and Wouters (Am Econ Rev 97(3):586–606, 2007. https://doi.org/10.1257/aer.97.3.586 ) model is extended by a generalized preference specification which allows for scaling wealth effects on the labor supply. The resulting model is estimated using Bayesian methods which draw upon the US data from the period 1965Q2 to 2014Q3. There are four main results: (i) Estimation of the model is inconclusive regarding the degree of wealth elasticity of the labor supply. As a result, two complementary versions of the model prevail, each of which has differing implications for the transmission and the quantitative importance of exogenous shocks. (ii) When the degree of wealth elasticity of the labor supply is low, news shocks replace risk premium shocks, suggesting that news shocks are one possible reason for fluctuations in US business cycles. (iii) When the Great Recession period is analyzed through the lenses of the two complementary versions of the model, two explanations emerge as potential reasons behind the deepening of the crisis: worsening credit conditions as well as the collapse of over-optimistic expectations regarding future productivity. (iv) For both model specifications, general developments in productivity are estimated to be positive. Therefore, productivity slowdown is not considered to be among the reasons for the emergence or persistence of the Great Recession.

Structural Panel Bayesian VAR with Multivariate Time-Varying Volatility to Jointly Deal with Structural Changes, Policy Regime Shifts, and Endogeneity Issues

This paper improves a standard Structural Panel Bayesian Vector Autoregression model in order to jointly deal with issues of endogeneity, because of omitted factors and unobserved heterogeneity, and volatility, because of policy regime shifts and structural changes. Bayesian methods are used to select the best model solution for examining if international spillovers come from multivariate volatility, time variation, or contemporaneous relationship. An empirical application among Central-Eastern and Western Europe economies is conducted to describe the performance of the methodology, with particular emphasis on the Great Recession and post-crisis periods. A simulated example is also addressed to highlight the performance of the estimating procedure. Findings from evidence-based forecasting are also addressed to evaluate the impact of an ongoing pandemic crisis on the global economy.

Disparate Recoveries: Wealth, Race, and the Working Class after the Great Recession

What does it mean to be working class in a society of extreme racial wealth inequality? Using data from the Survey of Consumer Finances, we investigate the wealth holdings of Black, Latinx, and white working-class households during the post–Great Recession (pre–COVID-19) period that spanned 2010 to 2019. We then explore the relationship between working-class and middle-class attainment using a wealth-based metric. We find that, in terms of their net worth, fewer Black working-class households benefitted from the economic recovery than white working-class households. Among white households, the working class saw the greatest increase in wealth in both absolute and relative terms. Working-class households were less likely to be middle class as defined by their wealth holdings, and Black and Latinx households were also less likely to be middle class. For Black households, racial identity is a stronger predictor of wealth attainment than occupational sector.

Income inequality and minority labor market dynamics: Medium term effects from the Great Recession

Using a difference-in-differences framework we evaluate the effect that exposure to a bank failure in the Great Recession period had on income inequality. We find that it led to a 1% higher Gini, relative rise of 38 cents for high earners, and 7% decline for lowest earners in treated MSAs. Moreover, we show that blacks saw a decline of 10.2%, Hispanics 9.8%, and whites 5.1% in income. Low income blacks and Hispanics drove much of the effect on inequality.

Dinamični turistični sektor: pregled in obeti za prihodnost

This article focuses on the dynamics of entries and exits in the tourism industry from 2006 to 2018. More specifically, it compares the entry and exit rates in each subsector of the tourism industry. Compared to other sectors of the economy, the tourism industry was much more dynamic in terms of both entry and exit rates. During and after the COVID-19 crisis, when the demand for tourism services decreased, we can expect lower entry rates of new firms and on the other hand increased exit rates. Among the sub-sectors, the most dynamic activity was observed for food and beverage service activities, followed by accommodation, especially in the pre-crisis year 2007. In the period after the post Great Recession period, more dynamism was observed in sports activities and amusement and recreation activities. Simple forecasts for the future also predict that the hospitality industry will remain among the most dynamic, which unfortunately in the COVID-19 crisis means that the number of businesses leaving this industry is predicted to be quite high.

Inflation targeting and financial conditions: UK monetary policy during the great moderation and financial crisis

In this paper, we investigate the interest rate setting behaviour of the Bank of England (BoE) over the 16 year period covering both the Great Moderation and the 2008−9 Global Financial Crisis and Great Recession. We contribute to the literature by using the BoE’s own inflation projections in our estimations. Also, we develop a novel measure of the output gap to encapsulate the array of real variables that the Monetary Policy Committee of the BoE reviews. In order to assess the BoE’s responsiveness to financial markets, we estimate a new financial conditions index that covers a wide range of financial indicators that feature in the Inflation Report. Our study provides some new insights into the BoE’s monetary policy behaviour. We show that the BoE was concerned not only with price stability but also output, employment and financial conditions during the Great Moderation. In contrast to previous studies, we find that the BoE responds relatively less to financial conditions and relatively more to inflation projections when the 2008−9 Global Financial Crisis and Great Recession period is included.

Internal Mobility: The Greater Responsiveness of Foreign-Born to Economic Conditions

In this article, we review the internal geographic mobility of immigrants and natives in the United States in the recent decades, with a focus on the period since 2000. We confirm a continuing secular decline in mobility already pointed out by the existing literature, and we show that it persisted in the post great recession period. We then focus on foreign-born and establish that, on average, they did not have total mobility rates higher than that of natives. However, their mobility response to local economic conditions was stronger than the response of natives in the period from 1980 to 2017. A review of recent research reveals that the higher elasticity of mobility of immigrants to economic conditions is a combination of lower sensitivity to local prices, higher propensity to move in the early years after immigration, and strong economic success of cities that were immigrant enclaves in the 1980s.

Understanding Recent Growth Dynamics in Small Urban Places: The Case of New England

This article utilizes recently published US Census data covering the pre–and post–Great Recession period (1990–2015) to identify key determinants of growth among small urban places in the New England Region. We find little evidence of random growth and robust evidence of convergence in growth, indicating that smaller urban areas tend to experience faster rates of growth than larger ones, over both the short and long term. Factors such as distance to large city areas and amenities are found to be particularly relevant to population growth rates. Having a diverse industrial base, high levels of human capital and proximity to large urban areas are factors that positively affect income growth. These results highlight the importance of policies geared to improve cities’ amenities, increase their industrial diversity, and attracting and retaining human capital in urban areas.

Well-being and unemployment during the Great Recession: an empirical analysis across UK local authority districts

ABSTRACT This paper examines the relationship between unemployment and psychological well-being before and during the Great Recession across 249 UK local authority districts (LADs). Substantial evidence demonstrates that unemployment has a large negative effect on psychological well-being. However, unique social norms develop in geographical areas with high unemployment rates, which significantly reduce the negative impact of unemployment on well-being. Though the post-2007 Great Recession period was characterized by widespread unemployment, few studies have examined the impact of this crisis on well-being in high- and low-unemployment local areas. The analysis constructs a rich panel data set which follows 15,798 individuals from 1998 to 2014, and applies difference-in-differences fixed-effects and general method of moments estimators. The findings indicate that unemployment had a large negative impact on psychological well-being. However, the magnitude of this effect did not change (or was even slightly lower) during the Great Recession. Furthermore, the unemployment social norm also ceased to have any additional effect on well-being during the Great Recession in high-unemployment LADs, as opposed to the pre-recession period.

Credit Union and Bank Subprime Lending in the Great Recession

We develop a theoretical model that predicts that credit unions will offer relatively less risky loans (e.g., fewer “subprime” mortgages) compared to similar commercial banks due to credit unions’ focus on member utility as nonprofit financial cooperatives. The model also predicts that banks will increase subprime lending more than credit unions during economic expansions and decrease subprime lending more than credit unions during recessions. We use the financial crisis and Great Recession period of 2007–2009 to test our model and find that, as predicted, commercial banks engaged in approximately five times more subprime lending relative to credit unions during the period leading up to the financial crisis (2003–2006). Banks also had delinquency and charge-off rates that were two to three times higher during and immediately following the crisis. We also find that banks were about two-and-a-half times more likely to fail and were significantly more likely to receive TARP government assistance funds. The results are robust to controlling for important differences between credit unions and banks besides structure and incentives, including asset size, portfolio concentration, market share, earnings, liquidity, leverage, mortgages sold to the secondary market, core deposits, and state-level indicators of economic performance and housing prices. We argue that the findings explain why credit unions often appear more risk averse relative to commercial banks, and hold important implications for researchers, policymakers and regulators.

Forecasting inflation gap persistence: Do financial sector professionals differ from nonfinancial sector ones?

AbstractThe purpose of the present paper is to investigate forecasted inflation gap persistence using professionals' survey‐based data, differentiating between financial and nonfinancial sectors professionals. We derive the forecasted inflation gap persistence, and using a state‐dependent model, we estimate the nonlinear persistence coefficient of the inflation gap. We distinguish between the pre‐Great Moderation, Great Moderation, and Great Recession periods. Our main results indicate that although the estimates of persistence for gross domestic product inflation largely confirm the results obtained using a linear model, for consumer price index inflation, we find that there is strong evidence for state dependence and time variation. By and large, the results are consistent with the price stability policy pursued in the Great Moderation period and perceived disinflationary pressures during the Great Recession period.