Do smaller labour market entry cohorts really reduce German unemployment?
AbstractIn this paper we analyze the consequences of small labour-market entry cohorts on (un)employment in Western Germany. From a theoretical point of view, small entry cohorts may on the one hand reduce unemployment due to â€šÃ„Ãºinverse cohort crowdingâ€šÃ„Ã¹ or on the other hand increase unemployment if companies reduce jobs disproportionately. Empirically, several studies on cohort crowding for the USA also provide ambiguous evidence regarding the direction of the effect: labour markets may become tighter or less tight with the size of the entering cohort. The European labour market reaction on demographic changes is even less clear and the German case is especially interesting: Given the sharp decline in birth rates since the beginning of the 1970s and the relatively rigid labour market constitution, the German reaction is likely to differ from the US experience. In order to study the effect of cohort size on (un)employment, we use regional population data from the Federal Statistical Office of Germany and social security and unemployment data from the Federal Employment Agency and the IAB for the years 1978 to 2008. We account for the likely endogeneity of cohort size due to migration of the (young) workforce, using lagged birth rates as instruments. In addition, we allow for spatial autocorrelation across western German regions. Our results are good news for the (Western) German labour market: small entry cohorts are indeed likely to decrease the overall unemployment rate and thus to improve the situation of job-seekers, given the stability of the historical effect. Accordingly, the employment rate will, according to our results, increase.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European Regional Science Association in its series ERSA conference papers with number ersa10p658.
Date of creation: Sep 2011
Date of revision:
Contact details of provider:
Postal: Welthandelsplatz 1, 1020 Vienna, Austria
Web page: http://www.ersa.org
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kapoor, Mudit & Kelejian, Harry H. & Prucha, Ingmar R., 2007. "Panel data models with spatially correlated error components," Journal of Econometrics, Elsevier, vol. 140(1), pages 97-130, September.
- Katz, L.F. & Murphy, K.M., 1991.
"Changes in Relative Wages, 1963-1987: Supply and Demand Factors,"
Harvard Institute of Economic Research Working Papers
1580, Harvard - Institute of Economic Research.
- Katz, Lawrence F & Murphy, Kevin M, 1992. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 35-78, February.
- Lawrence F. Katz & Kevin M. Murphy, 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," NBER Working Papers 3927, National Bureau of Economic Research, Inc.
- Nordström Skans, Oskar, 2002.
"Age effects in Swedish local labour markets,"
Working Paper Series
2002:11, IFAU - Institute for Evaluation of Labour Market and Education Policy.
- Diane J. Macunovich, 1999.
"The fortunes of one's birth: Relative cohort size and the youth labor market in the United States,"
Journal of Population Economics,
Springer, vol. 12(2), pages 215-272.
- Diane Macunovich, 1999. "The Fortune of One's Birth: Relative Cohort Size and the Youth Labor Market in the United States," Center for Policy Research Working Papers 6, Center for Policy Research, Maxwell School, Syracuse University.
- Ulrich Thießen & Konstantin A. Kholodilin & Boriss Siliverstovs, 2008.
"Does Aging Influence Sectoral Employment Shares?: Evidence from Panel Data,"
Discussion Papers of DIW Berlin
785, DIW Berlin, German Institute for Economic Research.
- Ulrich Thiessen & Konstantin A. Kholodilin & Boriss Siliverstovs, 2008. "Does Aging Influence Sectoral Employment Shares? Evidence from Panel Datak," KOF Working papers 08-214, KOF Swiss Economic Institute, ETH Zurich.
- Margarita Sapozhnikov & Robert K. Triest, 2007.
"Population Aging, Labor Demand, and the Structure of Wages,"
Working Papers, Center for Retirement Research at Boston College
wp2007-14, Center for Retirement Research, revised Oct 2007.
- Margarita Sapozhnikov & Robert K. Triest, 2007. "Population aging, labor demand, and the structure of wages," Working Papers 07-8, Federal Reserve Bank of Boston.
- Robert Shimer, 1999. "Why is the U.S. Unemployment Rate So Much Lower?," NBER Chapters, in: NBER Macroeconomics Annual 1998, volume 13, pages 11-74 National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier).
If references are entirely missing, you can add them using this form.