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They Are Even Larger! More (on) Puzzling Labor Market Volatilities

  • Gartner, Hermann

    ()

    (Institute for Employment Research (IAB), Nuremberg)

  • Merkl, Christian

    ()

    (University of Erlangen-Nuremberg)

  • Rothe, Thomas

    ()

    (Institute for Employment Research (IAB), Nuremberg)

This paper shows that the German labor market is more volatile than the US labor market. Specifically, the volatility of the cyclical component of several labor market variables (e.g., the job-finding rate, labor market tightness, and job vacancies) divided by the volatility of labor productivity is roughly twice as large as in the United States. We derive and simulate a simple dynamic labor market model with heterogeneous worker productivity. This model is able to explain the higher German labor market volatilities by a longer expected job duration.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4403.

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Length: 31 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4403
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  1. Gartner, Hermann & Merkl, Christian & Rothe, Thomas, 2009. "They are even larger! More (on) puzzling labor market volatilities," IAB Discussion Paper 200912, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  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. Shigeru Fujita & Garey Ramey, 2005. "The Dynamic Beveridge Curve," Macroeconomics 0509026, EconWPA.
  4. Merkl, Christian & Schmitz, Tom, 2009. "Macroeconomic volatilities and the labor market: first results from the euro experiment," Kiel Working Papers 1511, Kiel Institute for the World Economy (IfW).
  5. Christoffel, Kai & Kuester, Keith & Linzert, Tobias, 2009. "The role of labor markets for euro area monetary policy," Working Paper Series 1035, European Central Bank.
  6. Christoffel, Kai & Kuester, Keith & Linzert, Tobias, 2009. "The role of labor markets for euro area monetary policy," Kiel Working Papers 1513, Kiel Institute for the World Economy (IfW).
  7. Ronald Bachmann, 2005. "Labour Market Dynamics in Germany: Hirings, Separations, and Job-to-Job Transitions over the Business Cycle," SFB 649 Discussion Papers SFB649DP2005-045, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  8. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Working Papers 1950, National Bureau of Economic Research, Inc.
  9. Merkl, Christian & Snower, Dennis J., 2008. "Escaping the unemployment trap: The case of East Germany," Kiel Working Papers 1309 [rev.], Kiel Institute for the World Economy (IfW).
  10. Snower, Dennis J. & Merkl, Christian, 2006. "The caring hand that cripples: The East German labor market after reunification (detailed version)," Kiel Working Papers 1263, Kiel Institute for the World Economy (IfW).
  11. Haefke, Christian & Sonntag, Marcus & van Rens, Thijs, 2008. "Wage Rigidity and Job Creation," IZA Discussion Papers 3714, Institute for the Study of Labor (IZA).
  12. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, March.
  13. Merkl, Christian & Snower, Dennis J., 2006. "The Caring Hand that Cripples: The East German Labour Market after Reunification," CEPR Discussion Papers 5656, C.E.P.R. Discussion Papers.
  14. Burda, Michael C & Wyplosz, Charles, 1993. "Gross Worker and Job Flows in Europe," CEPR Discussion Papers 868, C.E.P.R. Discussion Papers.
  15. Robert E. Hall & Paul R. Milgrom, 2005. "The Limited Influence of Unemployment on the Wage Bargain," NBER Working Papers 11245, National Bureau of Economic Research, Inc.
  16. James Costain & Michael Reiter, 2005. "Business Cycles, Unemployment Insurance and the Calibration of Matching Models," Working Papers 215, Barcelona Graduate School of Economics.
  17. Hagedorn, Marcus & Manovskii, Iourii, 2008. "The cyclical behavior of equilibrium unemployment and vacancies revisited," Working Paper Series 0853, European Central Bank.
  18. Aubhik Khan & Julia K. Thomas, 2002. "Inventories and the business cycle: an equilibrium analysis of (S,s) policies," Working Papers 02-20, Federal Reserve Bank of Philadelphia.
  19. Wolfgang Lechthaler & Christian Merkl & Dennis Snower, 2010. "Monetary Persistence and the Labor Market: A New Perspective," CESifo Working Paper Series 2935, CESifo Group Munich.
  20. Robert E. Hall, 2006. "Job Loss, Job Finding and Unemployment in the U.S. Economy over the Past 50 Years," NBER Chapters, in: NBER Macroeconomics Annual 2005, Volume 20, pages 101-166 National Bureau of Economic Research, Inc.
  21. Dennis Snower & Christian Merkl & Alessio J. G. Brown, 2010. "An Incentive Theory of Matching," 2010 Meeting Papers 439, Society for Economic Dynamics.
  22. Sarah Dolfin, 2006. "An Examination of Firms Employment Costs," Mathematica Policy Research Reports 780d91c4f4c44661a7654d955, Mathematica Policy Research.
  23. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  24. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  25. Nordmeier, Daniela, 2012. "Worker flows in Germany: Inspecting the time aggregation bias," IAB Discussion Paper 201212, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  26. repec:mpr:mprres:5053 is not listed on IDEAS
  27. Michael Elsby & Bart Hobijn & Aysegül Sahin, 2009. "Unemployment dynamics in the OECD," Working Paper Series 2009-04, Federal Reserve Bank of San Francisco.
  28. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "Job reallocation, employment fluctuations and unemployment," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 18, pages 1171-1228 Elsevier.
  29. 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.
  30. repec:zbw:ifwkwp:1309 is not listed on IDEAS
  31. Klinger, Sabine & Wolf, Katja, 2008. "What explains changes in full-time and part-time employment in Western Germany? : a new method on an old question," IAB Discussion Paper 200807, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  32. Sarah Dolfin, 2006. "An examination of firms' employment costs," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 861-878.
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