IDEAS home Printed from https://ideas.repec.org/p/diw/diwwpp/dp581.html
   My bibliography  Save this paper

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

Author

Listed:
  • Reinhold Kosfeld
  • Christian Dreger
  • Hans-Friedrich Eckey

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 non-spatial 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 threatens 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.

Suggested Citation

  • Reinhold Kosfeld & Christian Dreger & Hans-Friedrich Eckey, 2006. "On the Stability of the German Beveridge Curve: A Spatial Econometric Perspective," Discussion Papers of DIW Berlin 581, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp581
    as

    Download full text from publisher

    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.44279.de/dp581.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lawrence F. Katz & Alan B. Krueger, 1999. "The High-Pressure U.S. Labor Market of the 1990s," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 1-88.
    2. Richard Archambault & Mario Fortin, 2001. "The Beveridge curve and unemployment fluctuations in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 34(1), pages 58-81, February.
    3. repec:bla:econom:v:47:y:1980:i:185:p:35-50 is not listed on IDEAS
    4. Nickell, Stephen & Nunziata, Luca & Ochel, Wolfgang & Quintini, Glenda, 2001. "The Beveridge curve, unemployment and wages in the OECD from the 1960s to the 1990s - preliminary version," LSE Research Online Documents on Economics 20113, London School of Economics and Political Science, LSE Library.
    5. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    6. Budd, Alan & Levine, Paul & Smith, Peter, 1988. "Unemployment, Vacancies and the Long-term Unemployed," Economic Journal, Royal Economic Society, vol. 98(393), pages 1071-1091, December.
    7. Olivier Jean Blanchard & Peter Diamond, 1994. "Ranking, Unemployment Duration, and Wages," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(3), pages 417-434.
    8. A. Bhargava & L. Franzini & W. Narendranathan, 2006. "Serial Correlation and the Fixed Effects Model," World Scientific Book Chapters, in: Econometrics, Statistics And Computational Approaches In Food And Health Sciences, chapter 4, pages 61-77, World Scientific Publishing Co. Pte. Ltd..
    9. Pissarides, Christopher, 2003. "Unemployment in Britain: a European success story," LSE Research Online Documents on Economics 2304, London School of Economics and Political Science, LSE Library.
    10. repec:bla:ecorec:v:75:y:1999:i:231:p:405-16 is not listed on IDEAS
    11. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 339-376.
    12. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    13. Lei Lei Song & Elizabeth Webster, 2003. "How Segmented are Skilled and Unskilled Labour Markets: the Case of Beveridge Curves," Australian Economic Papers, Wiley Blackwell, vol. 42(3), pages 332-345, September.
    14. 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.
    15. Daniel A. Griffith, 2003. "Spatial Autocorrelation and Spatial Filtering," Advances in Spatial Science, Springer, number 978-3-540-24806-4.
    16. Howard J. Wall & Gylfi Zoega, 2002. "The British Beveridge curve: A tale of ten regions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(3), pages 257-276, July.
    17. Luc Anselin & Raymond J. G. M. Florax, 1995. "Small Sample Properties of Tests for Spatial Dependence in Regression Models: Some Further Results," Advances in Spatial Science, in: Luc Anselin & Raymond J. G. M. Florax (ed.), New Directions in Spatial Econometrics, chapter 2, pages 21-74, Springer.
    18. Elizabeth Webster, 1999. "Labour Market Programs and the Australian Beveridge Curve: 1978 to 1997," The Economic Record, The Economic Society of Australia, vol. 75(4), pages 405-416, December.
    19. Priewe, Jan, 1993. "Privatisation of the Industrial Sector: The Function and Activities of the Treuhandanstalt," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 17(3), pages 333-348, September.
    20. repec:bla:econom:v:58:y:1991:i:231:p:279-97 is not listed on IDEAS
    21. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-690, September.
    22. Katharine G. Abraham, 1987. "Help-Wanted Advertising, Job Vacancies, and Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1), pages 207-248.
    23. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
    24. Daniel A. Griffith, 2000. "A linear regression solution to the spatial autocorrelation problem," Journal of Geographical Systems, Springer, vol. 2(2), pages 141-156, July.
    25. Lawrence Katz & Alan Krueger, 1999. "The High-pressure U.S. Labor Market of the 1990s," Working Papers 795, Princeton University, Department of Economics, Industrial Relations Section..
    26. repec:bla:obuest:v:64:y:2002:i:3:p:261-80 is not listed on IDEAS
    27. 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.
    28. Nickell, Stephen & Bell, Brian, 1995. "The Collapse in Demand for the Unskilled and Unemployment across the OECD," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 11(1), pages 40-62, Spring.
    29. Christopher A. Pissarides, 1992. "Loss of Skill During Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(4), pages 1371-1391.
    30. 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.
    31. Arthur Getis, 1990. "Screening For Spatial Dependence In Regression Analysis," Papers in Regional Science, Wiley Blackwell, vol. 69(1), pages 69-81, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kosfeld Reinhold, 2007. "Regional Spillovers and Spatial Heterogeneity in Matching Workers and Employers in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 227(3), pages 236-253, June.
    2. Klinger, Sabine & Weber, Enzo, 2014. "Decomposing Beveridge curve dynamics by correlated unobserved components: The impact of labour market reforms in Germany," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100499, Verein für Socialpolitik / German Economic Association.
    3. 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.
    4. Sabine Klinger & Enzo Weber, 2016. "Decomposing Beveridge Curve Dynamics By Correlated Unobserved Components," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(6), pages 877-894, December.
    5. Cristina Lincaru, 2010. "Reginal Mismatch Tendencies In Romania-Evidence From Beveridge Curve," Romanian Journal of Regional Science, Romanian Regional Science Association, vol. 4(2), pages 32-61, DECEMBER.
    6. Giuseppe Arbia, 2011. "A Lustrum of SEA: Recent Research Trends Following the Creation of the Spatial Econometrics Association (2007--2011)," Spatial Economic Analysis, Taylor & Francis Journals, vol. 6(4), pages 377-395, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kasrin Zein & Lang Guenter, 2013. "Estimating the Beveridge Curve of Egypt: An Econometric Study for the Period 2004 to 2010," Review of Middle East Economics and Finance, De Gruyter, vol. 8(3), pages 1-16, January.
    2. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    3. Andrés Álvarez, 2016. "La Curva de Beveridge en Colombia (1976-2014): Cambios cíclicos y estructurales," Borradores de Economia 962, Banco de la Republica de Colombia.
    4. Richard Dutu & Mark J. Holmes & Brian Silverstone, 2016. "Modelling A Regime-Shifting Beveridge Curve," Bulletin of Economic Research, Wiley Blackwell, vol. 68(1), pages 90-104, January.
    5. Kosfeld Reinhold, 2007. "Regional Spillovers and Spatial Heterogeneity in Matching Workers and Employers in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 227(3), pages 236-253, June.
    6. Rodenburg, Peter, 2007. "The Remarkable Place of the UV-Curve in Economic Theory," MPRA Paper 5823, University Library of Munich, Germany.
    7. Van Haeperen, Béatrice, 1998. "La courbe de Beveridge : Belgique, 1970 - 1993," LIDAM Discussion Papers IRES 1998019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    8. Farm, Ante, 2000. "Job Openings, Hirings, and Unmet Demand: A New Approach to the Matching Function and the Beveridge Curve," Working Paper Series 8/2000, Stockholm University, Swedish Institute for Social Research.
    9. Robert G. Valletta, 2005. "Why has the U.S. Beveridge curve shifted back? new evidence using regional data," Working Paper Series 2005-25, Federal Reserve Bank of San Francisco.
    10. Stops Michael & Mazzoni Thomas, 2010. "Matchingprozesse auf beruflichen Teilarbeitsmärkten / Job Matching on Occupational Labour Markets," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(3), pages 287-312, June.
    11. Howard J. Wall & Gylfi Zoega, 2002. "The British Beveridge curve: A tale of ten regions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(3), pages 257-276, July.
    12. Carsten Ochsen, 2009. "On the measurement of mismatch," Applied Economics Letters, Taylor & Francis Journals, vol. 16(4), pages 405-409.
    13. Steven J. Davis & R. Jason Faberman & John C. Haltiwanger, 2013. "The Establishment-Level Behavior of Vacancies and Hiring," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(2), pages 581-622.
    14. Abid, Anis Bou & Drine, Imed, 2011. "Efficiency frontier and matching process on the labour market: Evidence from Tunisia," Economic Modelling, Elsevier, vol. 28(3), pages 1131-1139, May.
    15. Benedikt Herz & Thijs van Rens, 2020. "Accounting for Mismatch Unemployment," Journal of the European Economic Association, European Economic Association, vol. 18(4), pages 1619-1654.
    16. Sanna‐Mari Hynninen & Aki Kangasharju & Jaakko Pehkonen, 2009. "Matching Inefficiencies, Regional Disparities, and Unemployment," LABOUR, CEIS, vol. 23(3), pages 481-506, September.
    17. Ochsen, Carsten, 2008. "How the distribution of unemployment by duration affects the unemployment rate," Thuenen-Series of Applied Economic Theory 88, University of Rostock, Institute of Economics.
    18. Shigeru Fujita & Garey Ramey, 2005. "The Dynamic Beveridge Curve," Macroeconomics 0509026, University Library of Munich, Germany.
    19. Gabriel P. Mathy, 2018. "Hysteresis and persistent long-term unemployment: the American Beveridge Curve of the Great Depression and World War II," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 12(1), pages 127-152, January.
    20. Rogerson, Richard & Shimer, Robert, 2011. "Search in Macroeconomic Models of the Labor Market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 7, pages Pages: 61, Elsevier.

    More about this item

    Keywords

    Beveridge curve; job mismatch; business cycle; long-term unemployment; spatial SUR model;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:diw:diwwpp:dp581. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bibliothek (email available below). General contact details of provider: https://edirc.repec.org/data/diwbede.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.