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The Importance of Two-Sided Heterogeneity for the Cyclicality of Labour Market Dynamics

  • Bachmann, Ronald

    ()

    (RWI)

  • David, Peggy

    ()

    (RWI)

Using administrative data on individual workers' employment history and firms, we investigate the cyclicality of worker flows on the German labour market. Focusing on heterogeneities on both sides of the labour market, we find that small firms hire mainly unemployed workers, and that they do so at the beginning of an economic expansion. Later on in the expansion, hirings more frequently result from direct job-to-job transitions to larger firms. Transitions between employment and unemployment at large firms are generally found to be more cyclical. However, this stylised fact disappears when the composition of the workforce is controlled for.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5358.

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Length: 38 pages
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:iza:izadps:dp5358
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