Impact of recession on labour supply : Experiences from the 1990s in Finland

Abstract

Discussion about active fiscal policy has gained momentum, apace with the deterioration of employment prospects. In the background, there are concerns about worsening unemployment and passivation of the working-age population. In this paper authors investigate the significance of the depression of the 1990s with respect to labour supply. The impacts are assessed using models estimated for participation rates by age cohorts. Authors start by assessing the overall impact of the depression of the 1990s on the size of the labour force and estimate on that basis what a corresponding disruption in the present situation would mean in terms of labour developments over the next few years. Subsequently, authors assess the impact of the depression of the 1990s on age cohorts entering the labour market. The reviews are based on a similar model used by Kostiainen (2008) to assess the factors affecting labour supply in Finland.