IDEAS home Printed from https://ideas.repec.org/p/imk/wpaper/163-2016.html
   My bibliography  Save this paper

Extensive versus intensive margin over the business cycle: New evidence for Germany and the United States

Author

Listed:
  • Alexander Herzog-Stein
  • Patrick Nüß

Abstract

This article analyses the relevance of the extensive and the intensive margin of labour adjustment over the business cycle in Germany and in the United States. Previous research has found that, firstly, the extensive margin dominates and that, secondly, the relative relevance of the two margins is of similar magnitude in both countries. This is in contrast with results from the research on the German employment performance in the Great Recession which attributed part of the employment success to the widespread use of instruments of internal flexibility. Our results confirm that generally, the extensive margin is still the dominant margin of labour adjustment over the business cycle in both countries. While our reassessment shows that the relative importance of the extensive and intensive margin for the United States is stable over time, in Germany it is quite volatile over time. In general the intensive margin in Germany is more important than in the United States. However, its actual size depends crucially on the choice of the smoothing parameter of the Hodrick-Prescott Filter. In the Great Recession and the subsequent time period the intensive margin is dominant in Germany independent of the choice of the smoothing parameter.

Suggested Citation

  • Alexander Herzog-Stein & Patrick Nüß, 2016. "Extensive versus intensive margin over the business cycle: New evidence for Germany and the United States," IMK Working Paper 163-2016, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  • Handle: RePEc:imk:wpaper:163-2016
    as

    Download full text from publisher

    File URL: http://www.boeckler.de/pdf/p_imk_wp_163_2016.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
    2. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
    3. Temel Taskin, 2013. "Intensive margin and extensive margin adjustments of labor market: Turkey versus United States," Economics Bulletin, AccessEcon, vol. 33(3), pages 2307-2319.
    4. Wesselbaum, Dennis, 2016. "The Intensive Margin Puzzle And Labor Market Adjustment Costs," Macroeconomic Dynamics, Cambridge University Press, vol. 20(6), pages 1458-1476, September.
    5. Costain, James S. & Reiter, Michael, 2008. "Business cycles, unemployment insurance, and the calibration of matching models," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1120-1155, April.
    6. Ohanian, Lee E. & Raffo, Andrea, 2012. "Aggregate hours worked in OECD countries: New measurement and implications for business cycles," Journal of Monetary Economics, Elsevier, vol. 59(1), pages 40-56.
    7. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2005. "Unemployment and vacancy fluctuations in the matching model: inspecting the mechanism," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 19-50.
    8. Shigeru Fujita & Garey Ramey, 2009. "The Cyclicality Of Separation And Job Finding Rates," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 415-430, May.
    9. Pierre St-Amant & Simon van Norden, 1997. "Measurement of the Output Gap: A Discussion of Recent Research at the Bank of Canada," Technical Reports 79, Bank of Canada.
    10. Michael C. Burda & Jennifer Hunt, 2011. "What Explains the German Labor Market Miracle in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 273-335.
    11. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    12. Dale Mortensen & Eva Nagypal, 2007. "More on Unemployment and Vacancy Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 327-347, July.
    13. Makoto Kakinaka & Hiroaki Miyamoto, 2012. "Extensive vs. Intensive Margin in Japan," Working Papers EMS_2012_14, Research Institute, International University of Japan.
    14. Christian Merkl & Dennis Wesselbaum, 2011. "Extensive versus intensive margin in Germany and the United States: any differences?," Applied Economics Letters, Taylor & Francis Journals, vol. 18(9), pages 805-808.
    15. repec:nms:wsimit:10.5771/0342-300x-2010-11-551 is not listed on IDEAS
    16. Alexander Herzog-Stein & Gustav A. Horn & Ulrike Stein, 2013. "Macroeconomic Implications of the German Short-time Work Policy during the Great Recession," Global Policy, London School of Economics and Political Science, vol. 4, pages 30-40, July.
    17. repec:nms:wsimit:10.5771/0342-300x-2010-11-577 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Germany; United States; aggregate labour adjustment; extensive and intensive margin; business cycle; total hours worked; employment; hours per employee; Great Recession;

    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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

    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:imk:wpaper:163-2016. 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: (Sabine Nemitz). General contact details of provider: http://edirc.repec.org/data/imkhbde.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.