Are More Severe Recessions Followed by Stronger Early Expansions of Employment in the Mexican States?

Abstract

This paper estimates conventional linear models to evaluate whether the average growth rate of employment (permanent, temporary, and total) over early expansions depends on the characteristics of prior recessions for the Mexican states during the 2001 and 2008 recessions. After controlling for the initial impulse of external and fiscal shocks as well as for the effects of structural factors, our results suggest that the depth and steepness of prior recessions (measured as the percentage accumulated drop and monthly average growth rate) have negative effects on employment growth over the first 9 and 12 months following the 2001 recession. In contrast, employment growth in the aftermath of the 2008 recession can be explained primarily by external and fiscal shocks. In general, the duration of recessions has no effect on employment growth after recessions.