Scandinavian Working Papers in Economics

Working Papers,
National Institute of Economic Research

No 117: The Persistent Labour-Market Effects of the Financial Crisis

Pär Österholm () and Marcus Mossfeldt ()
Additional contact information
Pär Österholm: National Institute of Economic Research, Postal: National Institute of Economic Research, P.O. Box 3116, SE-103 62 Stockholm, Sweden
Marcus Mossfeldt: National Institute of Economic Research, Postal: National Institute of Economic Research, P.O. Box 3116, SE-103 62 Stockholm, Sweden

Abstract: This paper estimates the effects of the financial crisis on the Swedish labour market. Using an unobserved components model and an external forecast, we estimate a future path for the NAIRU. Judging by this analysis, the labour market will be in equilibrium again in 2013. Linking the NAIRU to other labour-market variables through an estimated vector error correction model and population projections, it is found that this new equilibrium is associated with a smaller equilibrium labour force and lower equilibrium employment.

Keywords: Discouraged worker; Unobserved components; Cointegration

JEL-codes: E24

29 pages, March 1, 2010

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