IDEAS home Printed from https://ideas.repec.org/p/cen/wpaper/17-11r.html
   My bibliography  Save this paper

Labor Reallocation, Employment, and Earnings: Vector Autoregression Evidence

Author

Listed:
  • Henry R. Hyatt
  • Tucker S. McElroy

Abstract

Analysis of the labor market has given increasing attention to the reallocation of jobs across employers and workers across jobs. However, whether and how job reallocation and labor market “churn” affects the health of the labor market remains an open question. In this paper, we present time series evidence for the U.S. 1993-2013 and consider the relationship between labor reallocation, employment, and earnings using a vector autoregression (VAR) framework. We find that an increase in labor market churn by 1 percentage point predicts that, in the next quarter, employment will increase by 100 to 560 thousand jobs, lowering the unemployment rate by 0.05 to 0.25 percentage points. Job destruction does not predict future changes in employment but a 1 percentage point increase in job destruction leads to an increase in future unemployment 0.14 to 0.42 percentage points. We find mixed results on the relationship between labor reallocation rates and earnings: we nd that, especially for earnings derived from administrative records data, a 1 percentage point increase to either job destruction or churn leads to increased earnings of less than 2 percent. Results vary substantially depending on the earnings measure we use, and so the evidence inconsistent on whether productivity-enhancing aspects of churn and job destruction provide earnings gains for workers in aggregate. Our findings on churn leading to increased employment and a lower unemployment rate are consistent with models of replacement hiring and vacancy chains.

Suggested Citation

  • Henry R. Hyatt & Tucker S. McElroy, 2017. "Labor Reallocation, Employment, and Earnings: Vector Autoregression Evidence," Working Papers 17-11r, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:17-11r
    as

    Download full text from publisher

    File URL: https://www2.census.gov/ces/wp/2017/CES-WP-17-11R.pdf
    File Function: First version, 2017
    Download Restriction: no

    References listed on IDEAS

    as
    1. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Econometrica, Econometric Society, vol. 74(2), pages 323-364, March.
    2. Champagne, Julien & Kurmann, André & Stewart, Jay, 2017. "Reconciling the divergence in aggregate U.S. wage series," Labour Economics, Elsevier, vol. 49(C), pages 27-41.
    3. Tucker McElroy, 2008. "Exact formulas for the Hodrick-Prescott filter," Econometrics Journal, Royal Economic Society, vol. 11(1), pages 209-217, March.
    4. Stephanie Aaronson & Tomaz Cajner & Bruce Fallick & Felix Galbis-Reig & Christopher Smith & William Wascher, 2014. "Labor Force Participation: Recent Developments and Future Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(2 (Fall)), pages 197-275.
    5. Timothy Dunne & Lucia Foster & John Haltiwanger & Kenneth R. Troske, 2004. "Wage and Productivity Dispersion in United States Manufacturing: The Role of Computer Investment," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 397-430, April.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cen:wpaper:17-11r. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dawn Anderson). General contact details of provider: http://edirc.repec.org/data/cesgvus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.