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J. Risk Financial Manag. 2019, 12(1), 20; https://doi.org/10.3390/jrfm12010020

Finance and Jobs: How Financial Markets and Prudential Regulation Shape Unemployment Dynamics

Macro-economic policies and jobs unit, Research Department, International Labour Organization (ILO), 1211 Geneva, Switzerland
Received: 30 November 2018 / Revised: 8 January 2019 / Accepted: 17 January 2019 / Published: 24 January 2019
(This article belongs to the Special Issue Financial Crises, Macroeconomic Management, and Financial Regulation)
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Abstract

This article explores the impact of financial market regulation on jobs. It argues that understanding the impact of finance on labor markets is key to an understanding of the trade-off between economic stability and financial sector growth. The article combines information on labor market flows with indicators of financial market development and reforms to assess the implications of financial markets on employment dynamics directly, using information from the International Labour Organization (ILO) datatabse on unemployment flows. On the basis of a matching model of the labor market, it analyses the economic, institutional, and policy determinants of unemployment in- and out-flows. Against a set of basic controls, we present evidence regarding the relationship between financial sector development and reforms and their impact on unemployment dynamics. Using scenario analysis, the article demonstrates the importance of broad financial sector re-regulation to stabilize unemployment inflows and to promote faster employment growth. In particular, we find that encompassing financial sector regulation, had it been in place prior to the global financial crisis in 2008, would have helped a faster recovery in jobs. View Full-Text
Keywords: unemployment in- and out-flows; financial market development; financial market reforms; reform scenarios unemployment in- and out-flows; financial market development; financial market reforms; reform scenarios
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Ernst, E. Finance and Jobs: How Financial Markets and Prudential Regulation Shape Unemployment Dynamics. J. Risk Financial Manag. 2019, 12, 20.

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