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

Listed author(s):
  • 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
Handle: RePEc:iza:izadps:dp4403
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  1. Marcus Hagedorn & Iourii Manovskii, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," 2005 Meeting Papers 460, Society for Economic Dynamics.
  2. Brown, Alessio J. G. & Merkl, Christian & Snower, Dennis J., 2009. "An Incentive Theory of Matching," IZA Discussion Papers 4145, Institute for the Study of Labor (IZA).
  3. Barbara Petrongolo & Christopher A. Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers dp0470, Centre for Economic Performance, LSE.
  4. Merkl, Christian & Snower, Dennis J., 2008. "Escaping the unemployment trap: The case of East Germany," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 542-556, December.
  5. 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).
  6. Gartner, Hermann & Merkl, Christian & Rothe, Thomas, 2009. "They are even larger! More (on) puzzling labor market volatilities," Kiel Working Papers 1545, Kiel Institute for the World Economy (IfW).
  7. Kai Christoffel & Keith Kuester & Tobias Linzert, 2009. "The Role of Labor Markets for Euro Area Monetary Policy," Kiel Working Papers 1513, .
  8. Michael Elsby & Bart Hobijn & Aysegül Sahin, 2009. "Unemployment dynamics in the OECD," Working Paper Series 2009-04, Federal Reserve Bank of San Francisco.
  9. Burda, Michael C & Wyplosz, Charles, 1993. "Gross Worker and Job Flows in Europe," CEPR Discussion Papers 868, C.E.P.R. Discussion Papers.
  10. Aubhik Khan & Julia K. Thomas, 2007. "Inventories and the Business Cycle: An Equilibrium Analysis of ( S , s ) Policies," American Economic Review, American Economic Association, vol. 97(4), pages 1165-1188, September.
  11. 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.
  12. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  13. Wolfgang Lechthaler & Christian Merkl & Dennis Snower, 2010. "Monetary Persistence and the Labor Market: A New Perspective," CESifo Working Paper Series 2935, CESifo Group Munich.
  14. 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.
  15. 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.
  16. Fujita, Shigeru & Ramey, Garey, 2005. "The Dynamic Beveridge Curve," University of California at San Diego, Economics Working Paper Series qt4m04n09h, Department of Economics, UC San Diego.
  17. James S. Costain & Michael Reiter, 2003. "Business cycles, unemployment insurance and the calibration of matching models," Economics Working Papers 872, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2006.
  18. Sarah Dolfin, 2006. "An examination of firms' employment costs," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 861-878.
  19. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  20. Christian Haefke & Marcus Sonntag & Thijs van Rens, 2012. "Wage Rigidity and Job Creation," Working Papers 629, Barcelona Graduate School of Economics.
  21. repec:mpr:mprres:5053 is not listed on IDEAS
  22. 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.
  23. repec:zbw:ifwkwp:1309 is not listed on IDEAS
  24. 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).
  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. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90 National Bureau of Economic Research, Inc.
  27. 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.
  28. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  29. Sarah Dolfin, 2006. "An Examination of Firms Employment Costs," Mathematica Policy Research Reports 780d91c4f4c44661a7654d955, Mathematica Policy Research.
  30. Dale T. Mortensen & Christopher A. Pissarides, 1999. "Job Reallocation, Employment Fluctuations and Unemployment," CEP Discussion Papers dp0421, Centre for Economic Performance, LSE.
  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].
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