Reference : The effect of financial fragility on employment
Scientific journals : Article
Business & economic sciences : Finance
Business & economic sciences : Quantitative methods in economics & management
Business & economic sciences : Macroeconomics & monetary economics
Business & economic sciences : Special economic topics (health, labor, transportation…)
The effect of financial fragility on employment
Chletsos, Michael* mailto [University of Piraeus > Department of Economics]
Sintos, Andreas* mailto [University of Ioannina > Department of Economics]
* These authors have contributed equally to this work.
Economic Modelling
Aspects of Macroeconomic Analysis and International Finance
[en] Financial fragility ; Employment ; Panel data models
[en] Financial fragility increases economic uncertainty and restricts credit to firms, leading to lower economic growth and employment. Despite voluminous research on the relation between financial fragility and growth, the effect of financial fragility on employment is understudied. Using a global panel for the period 1998–2017, we identify a negative effect of financial fragility on employment, even after accounting for unobserved country heterogeneity. The impact of financial fragility is stronger in the post-crisis period and in more rigid labor markets, and the magnitude of the effect is higher in developing/emerging economies than in developed countries. Nevertheless, this negative effect can be mitigated in countries with a higher level of financial market development. Our results are robust to the use of several robustness tests, including different measures of financial fragility and an instrumental variables approach.

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