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Empirical Analysis of Labor Markets over Business Cycles: An International Comparison

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  • Jan Bruha
  • Jiri Polansky

Abstract

The goal of this paper is to document and summarize the main cyclical features of labor market macroeconomic data in advanced countries. We report the second moments (correlations, coherences and volatility) of labor market variables for various data transformations (growth rates and cycles). Then we use dynamic factor models to inquire about the number of orthogonal shocks that drives labor market data dynamics. We also investigate the time-varying nature of these features: we ask whether they are stable over time, especially at times of severe crises such as the Great Recession. Finally, we compare these features across countries to see whether there are groups of countries characterized by similar features, such as labor market institutions. We find that certain features are stable over time and across countries (such as Okun's Law), while others are not. We also confirm that labor market institutions influence selected characteristics, but to a limited degree only. We find that one or at most two orthogonal shocks seem to drive the cyclical dynamics of labor market variables in most countries. The paper concludes with our interpretation of these findings for structural macroeconomic models.

Suggested Citation

  • Jan Bruha & Jiri Polansky, 2015. "Empirical Analysis of Labor Markets over Business Cycles: An International Comparison," Working Papers 2015/15, Czech National Bank.
  • Handle: RePEc:cnb:wpaper:2015/15
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Dynamic factor models; Great Recession; labor market institutions; Okun's Law;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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