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On the Stability of the German Beveridge Curve: A Spatial Econometric Perspective

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Author Info

  • Kosfeld, Reinhold

    ()
    (University of Kassel)

  • Dreger, Christian

    ()
    (DIW Berlin)

  • Eckey, Hans-Friedrich

    ()
    (University of Kassel)

Abstract

In 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 nonspatial 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 challenges 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 Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2099.

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Length: 26 pages
Date of creation: Apr 2006
Date of revision:
Publication status: published in: Annals of Regional Science, 2008, 42, 967-986
Handle: RePEc:iza:izadps:dp2099

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Keywords: long-term unemployment; business cycle; job mismatch; Beveridge curve; spatial SUR model;

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References

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  17. Nicolaas Groenewold, 2003. "Long-Run Shifts of the Beveridge Curve and the Frictional Unemployment Rate in Australia," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 6(1), pages 65-82, March.
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Cited by:
  1. Klinger, Sabine & Weber, Enzo, 2014. "Decomposing Beveridge curve dynamics by correlated unobserved components," University of Regensburg Working Papers in Business, Economics and Management Information Systems 480, University of Regensburg, Department of Economics.
  2. Richard Dutu & Mark J. Holmes & Brian Silverstone, 2009. "Modelling a Regime-Shifting New Zealand Beveridge Curve," Working Papers in Economics 09/13, University of Waikato, Department of Economics.

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