The Effect of Financial Crisis on Hiring and Separation Rates: Evidence from Tunisian Labor Market

The goal of this paper is to investigate the effects of the global financial crisis on employment conditions in Tunisia, specifically regarding hiring and separation rates. A panel data model which utilized firm level data covering five sectors over the period of 2007– June 2010 is used to explain quarterly relationships between hiring and separation rates in Tunisia. A random effect model was also used to help understand the most significant variables that affect the variation of hiring and separation rates. The results indicate a decline in separation rates, highlighting the vulnerability of Tunisia’s labor market to a global slowdown. Weak labor demand is a response to the company’s inability to create more jobs, which causes many Tunisian youth to put off work for school. The research results in this paper should urge policymakers to create a comprehensive plan to bridge the unemployment gap while promoting increased job opportunities.