The Labor Market in Brazil and the 2008 Financial Crisis: An Analysis Based on the Flow Approach

Advisor: Juliano Assunção

Co-advisor: Gustavo Gonzaga

This paper uses matched employer-employee data to investigate a relevant transmission channel of the 2008 financial crisis on the labor market in Brazil: the credit channel. I study the cross-sector impact on employment decisions of firms of the manufacturing industry; to do that I rely on the flow approach, i.e., on measures such as hiring, separation and turnover rates. I find that the credit was an important transmission mechanism of the crises to the real economy. More specifically, I find that more financially constrained industries had higher firing rates during the crisis. Younger and less skilled workers were more adversely affected through the credit channel. Also, I find evidence of reallocation of workers from more to less financially dependent sectors, and particularly so for the smaller firms. I also find some evidence of reallocation within sector and across firm size intervals.