The Impact of Financial Crises on Labor Markets, Household Incomes, and Poverty : A Review of Evidence

By P. Fallon, Robert E. Lucas. 2002

287 citations recorded by the source corpus.

The 1990s have witnessed several financial crises, of which the East Asia and Mexico tequila crises are perhaps the most well-known. What impact have these crises had on labor markets, household incomes, and poverty? Total employment fell by much less than production declines and even increased in some cases. However, these aggregates mask considerable churning in employment across sectors, employment status, and location. Economies that experienced the sharpest currency depreciations suffered the deepest cuts in real wages, though deeper cuts in real wages relative to Gross Domestic Product (GDP) were associated with smaller rises in unemployment. To some extent, families smoothed their incomes through increased labor force participation and private transfers, though the limited evidence available suggests that wealthier families were better able to smooth consumption. The initial impact of the crises was on the urban corporate sector, but rural households were affected as well and in some instances suffered deeper losses than did urban families. School enrollment declined, especially among poorer families, as did use of health facilities, but the impact on children's nutrition levels appears to vary. Crises have typically proved short-lived, but whether households plunged into poverty during a crisis is able to recover as the economy does remain an open question.

Subfields: Accounting, Sociology and Political Science, Soil Science

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Citations in the corpus

Who is Hit Hardest During a Financial Crisis? The Vulnerability of Young Men and Women to Unemployment in an Economic Downturn (2009, background): “2 For example, findings presented in Fallon and Lucas (2002) indicate that there were considerable falls in real wages in the crises of the 1990s in East Asia and Mexico.”
School Attendance, Child Labor and Local Labor Market Fluctuations in Urban Brazil (2003, background): “In Indonesia and in Thailand, GDP decreased by 13.7% and by 10.2%, respectively.”
The Great Recession of 2008-2009: Causes, Consequences and Policy Responses (2010, background): “36 See, for example, the case of the East Asian Crisis in Fallon and Lucas (2002).”
Economic Crises and Natural Disasters: Coping Strategies and Policy Implications (2003, background): “In the Latin American and Caribbean region alone, during 1980–99 there were 38 major droughts, floods, hurricanes, tropical storms, landslides, earthquakes, volcano eruptions and El Ni~no episodes (IADB, 2000).”
Economic Crisis and Inequality of Educational Opportunity in Latin America (2010, background): “It is well established that employment and real wages decline and become more volatile during economic downturns, constraining families’ ability to afford educational investments (Fallon and Lucas 2002).”
How Did the Great Recession Affect Different Types of Workers? Evidence from 17 Middle-Income Countries (2011, unknown): “37 See Figure A2 in Appendix for the patterns of gender disparities in employment, unemployment, and nonparticipation ratios disaggregated by education group.”
Does globalization hurt the poor? (2002, background): “The recent crisis in East Asia is a case in point (see, for instance, Horton and Mazumdar (2001), and Fallon and Lucas (2002)). A key problem associated with financial openness is that access to world capital markets tends to be asymmetric. Many developing countries (including some of the richer one”