On the Stability of the German Beveridge Curve: A Spatial Econometric Perspective
AbstractIn this paper, the framework of the aggregated Beveridge curve is used to investigate the effectiveness of the job matching process using German regional labour market data. For a fixed matching technology, the Beveridge curve postulates a negative relationship between the unemployment rate and the rate of vacancies, which is efficiently estimated using spatial econometric techniques. The eigenfunction decomposition approach suggested by Griffith (2000, 2003) is the workhorse to identify spatial and non-spatial components. As the significance of the spatial pattern might vary over time, inference is conducted on the base of a spatial SUR model. Shifts of the Beveridge curve will affect its position, and time series estimates on this parameter are obtained. In contrast to findings for the US and the UK, the results provide serious indication that the degree of job mismatch has increased over the last decade. Although the outward shift of the Beveridge curve can be explained by structural factors such as the evolution of long term unemployment, it is also affected by business cycle fluctuations. The role of cyclical factors threatens the stability property of the curve. The relationship might be inappropriate to investigate policy measures directed to improve the mismatch, such as labour market reforms.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 581.
Length: 25 p.
Date of creation: 2006
Date of revision:
Publication status: Published in: The Annals of Regional Science 42 (2008) 4, 967-986
Beveridge curve; job mismatch; business cycle; long-term unemployment; spatial SUR model;
Other versions of this item:
- Christian Dreger & Reinhold Kosfeld, 2006. "On the Stability of the German Beveridge Curve. A Spatial Econometric Perspective," ERSA conference papers ersa06p396, European Regional Science Association.
- Kosfeld, Reinhold & Dreger, Christian & Eckey, Hans-Friedrich, 2006. "On the Stability of the German Beveridge Curve: A Spatial Econometric Perspective," IZA Discussion Papers 2099, Institute for the Study of Labor (IZA).
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-27 (All new papers)
- NEP-GEO-2006-05-27 (Economic Geography)
- NEP-MAC-2006-05-27 (Macroeconomics)
- NEP-URE-2006-05-27 (Urban & Real Estate Economics)
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