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Dynamics of worker flows and vacancies: evidence from the sign restriction approach

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  • Shigeru Fujita

Abstract

This paper establishes robust dynamic features of the worker reallocation process in the U.S. labor market. The author uses structural VARs with sign restrictions, which take the form of restricting the short-run negative relationship between vacancies and unemployment (i.e., Beveridge curve). Despite the "weakness" of these restrictions, they reveal a clear, unambiguous pattern that when unemployment increases and vacancies drop, (i) both the separation rate and gross separations rise quickly and remain persistently high, (ii) the job finding rate and vacancies drop in a hump-shaped manner, and (iii) gross hires respond little initially, but eventually rise. These results point to the importance of job loss in understanding U.S. labor market dynamics. This pattern also holds with respect to different kinds of shocks that induce the same Beveridge curve relationship. Given the robustness, these results should be taken seriously in the quantitative macro/labor literature. This paper also considers the "disaggregate model," which uses data disaggregated by six demographic groups and incorporates transitions into and out of the labor force. The author finds that the separation rate continues to play a dominant role among prime-age male workers, while, for other groups, changes in the job finding rate are more important. ; Previous title: Dynamics of worker flows and vacancies: evidence from the agnostic identification approach.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 07-12.

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Date of creation: 2009
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Handle: RePEc:fip:fedpwp:07-12

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Keywords: Labor market;

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References

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  1. Shigeru Fujita & Garey Ramey, 2006. "The cyclicality of job loss and hiring," Working Papers, Federal Reserve Bank of Philadelphia 06-17, Federal Reserve Bank of Philadelphia.
  2. Robert E. Hall, 2005. "Employment Efficiency and Sticky Wages: Evidence from Flows in the Labor Market," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 87(3), pages 397-407, August.
  3. Matthew D. Shapiro & Mark W. Watson, 1988. "Sources of Business Cycle Fluctuations," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 870, Cowles Foundation for Research in Economics, Yale University.
  4. Yashiv, Eran, 2006. "U.S. Labor Market Dynamics Revisited," IZA Discussion Papers 2455, Institute for the Study of Labor (IZA).
  5. Oliver Jean Blanchard & Peter Diamond, 1990. "The Cyclical Behovior of the Gross Flows of U.S. Workers," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 85-156.
  6. Solon, Gary, 1986. "Effects of Rotation Group Bias on Estimation of Unemployment," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 4(1), pages 105-09, January.
  7. Juan Francisco Rubio-Ramírez & Daniel Waggoner & Tao Zha, 2005. "Markov-switching structural vector autoregressions: theory and application," Working Paper, Federal Reserve Bank of Atlanta 2005-27, Federal Reserve Bank of Atlanta.
  8. John Haltiwanger & Steven J. Davis, 1999. "On the Driving Forces behind Cyclical Movements in Employment and Job Reallocation," American Economic Review, American Economic Association, American Economic Association, vol. 89(5), pages 1234-1258, December.
  9. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers, Centre for Economic Performance, LSE dp0110, Centre for Economic Performance, LSE.
  10. Antonella Trigari, 2009. "Equilibrium Unemployment, Job Flows, and Inflation Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 41(1), pages 1-33, 02.
  11. Uhlig, H.F.H.V.S., 1999. "What are the Effects of Monetary Policy on Output? Results from an Agnostic Identification Procedure," Discussion Paper, Tilburg University, Center for Economic Research 1999-28, Tilburg University, Center for Economic Research.
  12. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
  13. Robert Shimer, 2007. "Reassessing the Ins and Outs of Unemployment," NBER Working Papers 13421, National Bureau of Economic Research, Inc.
  14. Katharine G. Abraham, 1987. "Help-Wanted Advertising, Job Vacancies, and Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, Economic Studies Program, The Brookings Institution, vol. 18(1), pages 207-248.
  15. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, Elsevier, vol. 36(2), pages 269-300, November.
  16. Michael W. Elsby & Ryan Michaels & Gary Solon, 2007. "The Ins and Outs of Cyclical Unemployment," NBER Working Papers 12853, National Bureau of Economic Research, Inc.
  17. Shigeru Fujita & Garey Ramey, 2007. "Reassessing the Shimer facts," Working Papers, Federal Reserve Bank of Philadelphia 07-2, Federal Reserve Bank of Philadelphia.
  18. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 676-90, September.
  19. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262540932, December.
  20. Abowd, John M & Zellner, Arnold, 1985. "Estimating Gross Labor-Force Flows," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 3(3), pages 254-83, June.
  21. Cooley, Thomas F. & Quadrini, Vincenzo, 1999. "A neoclassical model of the Phillips curve relation," Journal of Monetary Economics, Elsevier, Elsevier, vol. 44(2), pages 165-193, October.
  22. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, American Economic Association, vol. 86(1), pages 112-32, March.
  23. Shigeru Fujita & Christopher J. Nekarda & Garey Ramey, 2007. "The cyclicality of worker flows: new evidence from the SIPP," Working Papers, Federal Reserve Bank of Philadelphia 07-5, Federal Reserve Bank of Philadelphia.
  24. Shigeru Fujita, 2004. "Vacancy persistence," Working Papers, Federal Reserve Bank of Philadelphia 04-23, Federal Reserve Bank of Philadelphia.
  25. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 25-49, March.
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Citations

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Cited by:
  1. Ren�e Fry & Adrian Pagan, 2011. "Sign Restrictions in Structural Vector Autoregressions: A Critical Review," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 49(4), pages 938-60, December.
  2. Atsushi Inoue & Lutz Kilian, 2013. "Inference on Impulse Response Functions in Structural VAR Models," TERG Discussion Papers, Graduate School of Economics and Management, Tohoku University 307, Graduate School of Economics and Management, Tohoku University.
  3. Michele Campolieti & Deborah Gefang & Gary Koop, 2013. "A New Look at Variation in Employment Growth in Canada: The Role of Industry, Provincial, National and External Factors," Working Papers, Lancaster University Management School, Economics Department 26145565, Lancaster University Management School, Economics Department.
  4. Klinger, Sabine & Weber, Enzo, 2012. "Decomposing Beveridge curve dynamics by correlated unobserved components," IAB Discussion Paper, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] 201228, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  5. Nordmeier, Daniela & Weber, Enzo, 2013. "Conditional Patterns of Unemployment Dynamics in Germany," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order, Verein für Socialpolitik / German Economic Association 79958, Verein für Socialpolitik / German Economic Association.
  6. Regis Barnichon, 2009. "Demand-driven job separation: reconciling search models with the ins and outs of unemployment," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2009-24, Board of Governors of the Federal Reserve System (U.S.).
  7. Almut Balleer, 2009. "New Evidence, Old Puzzles: Technology Shocks and Labor Market Dynamics," Kiel Working Papers, Kiel Institute for the World Economy 1500, Kiel Institute for the World Economy.
  8. Nordmeier, Daniela & Weber, Enzo, 2013. "Patterns of unemployment dynamics in Germany," IAB Discussion Paper, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] 201302, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  9. Kilian, Lutz, 2011. "Structural Vector Autoregressions," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8515, C.E.P.R. Discussion Papers.
  10. Shigeru Fujita & Garey Ramey, 2012. "Exogenous vs. endogenous separation," Working Papers, Federal Reserve Bank of Philadelphia 12-2, Federal Reserve Bank of Philadelphia.

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