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

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Christian Dreger ()
Reinhold Kosfeld ()

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Abstract

In this paper, we use the Beveridge relationship to address the effectiveness of the matching process, that brings workers searching for jobs together with employers searching for workers. For a fixed matching technology, the curve yields a negative relation between the unemployment rate and the rate of vacancies. Movements along a curve reflect adjustments over the business cycle. In a recession vacancies are closed, and workers enter the unemployed. Shifts of the curve are more important here, as they point to structural change. For example, an outward shift of the curve indicates an in-creased mismatch, perhaps due to a deterioration in human capital of the unemployed or changes in the unemployment benefit system, which affects the willingness of the un-employed to fill out vacancies. Empirical estimates rely on panel data. A sample of 180 regional labour markets is em-ployed, and the sample period runs from 1993 to 2004. The regional labour markets are seperated on the base of flows of the job commuters and correspond to travel-to-work areas. Due to common or idiosyncratic shocks, however, the cross sections are not inde-pendent. Instead, they are tied together to some extent, and the spillovers account for spatial effects. As these patterns can have an impact on the correlation between unem-ployment and vacancy rates, the results of OLS regressions are eventually biased. Thus the Beveridge curve is efficiently estimated by a spatial procedure, where regional de-pendencies are taken into account. No previous paper has investigated a similar broad regional dataset so far. The eigenfunction decomposition approach suggested by Griffith (1996, 2000) is used to identify spatial and non-spatial components in regression analysis. As the spatial pat-tern may vary over time, inference is conducted on the base of a spatial seemingly unre-lated regressions (spatial SUR) model. Due to this setup, efficient estimates for the Beveridge relationship are obtained. Time dummies are used to control for shifts in the curve. The empirical results provide some indication that the degree of job mismatch has increased over the recent periods.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa06p396.

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Date of creation: Aug 2006
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Handle: RePEc:wiw:wiwrsa:ersa06p396

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  2. Hoyt Bleakley & Jeffrey C. Fuhrer, 1997. "Shifts in the Beveridge Curve, job matching, and labor market dynamics," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 3-19. [Downloadable!]
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  5. Hans-Friedrich Eckey & Reinhold Kosfeld & Matthias Türck, 2005. "Regional Convergence in Germany. A Geographically Weighted Regression Approach," Discussion Papers in Economics 76/05, University of Kassel, Institute of Economics. [Downloadable!]
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  6. Pissarides, Christopher A, 1992. "Loss of Skill during Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1371-91, November. [Downloadable!] (restricted)
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  8. Blanchard, Olivier Jean & Diamond, Peter A, 1994. "Ranking, Unemployment Duration, and Wages," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 417-34, July. [Downloadable!] (restricted)
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  15. Hans-Friedrich Eckey & Reinhold Kosfeld & Matthias Türck, 2003. "Intra- und internationale Spillover-Effekte zwischen den EU-Regionen," Discussion Papers in Economics 50/03, University of Kassel, Institute of Economics. [Downloadable!]
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  16. Nicolaas Groenewold, 2003. "Long-Run Shifts of the Beveridge Curve and the Frictional Unemployment Rate in Australia," Australian Journal of Labour Economics (AJLE), The Centre for Labour Market Research (CLMR), Curtin Business School, vol. 6(1), pages 65-82, March.
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  20. Hans-Friedrich Eckey & Reinhold Kosfeld, 2004. "Regionaler Wirkungsgrad und räumliche Ausstrahlungseffekte der Innovationsförderung," Discussion Papers in Economics 55/04, University of Kassel, Institute of Economics. [Downloadable!]
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  24. Feld, Lars P. & Voigt, Stefan, 2003. "Economic growth and judicial independence: cross-country evidence using a new set of indicators," European Journal of Political Economy, Elsevier, vol. 19(3), pages 497-527, September. [Downloadable!] (restricted)
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  25. Martin Debus & Jochen Michaelis, 2006. "Ausbildung, Erwerbsphase, Renteneintritt - demografischer Wandel und optimale Zeitallokation im Lebenszyklus," Discussion Papers in Economics 79/06, University of Kassel, Institute of Economics. [Downloadable!]
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  28. Hans-Friedrich Eckey & Reinhold Kosfeld & Matthias Türck, 2004. "Regionale Produktionsfunktionen mit Spillover-Effekten für Deutschland," Discussion Papers in Economics 64/04, University of Kassel, Institute of Economics. [Downloadable!]
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