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

  • Hermann Gartner
  • Christian Merkl
  • Thomas Rothe

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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File URL: https://www.ifw-members.ifw-kiel.de/publications/they-are-even-larger-more-on-puzzling-labor-market-volatilities/kwp-1545.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1545.

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Length: 28 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:kie:kieliw:1545
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  1. Christian Haefke & Marcus Sonntag & Thijs van Rens, 2012. "Wage Rigidity and Job Creation," Working Papers 629, Barcelona Graduate School of Economics.
  2. James Costain & Michael Reiter, 2005. "Business Cycles, Unemployment Insurance and the Calibration of Matching Models," Working Papers 215, Barcelona Graduate School of Economics.
  3. Wolfgang Lechthaler & Christian Merkl & Dennis Snower, 2008. "Monetary Persistence and the Labor Market: A New Perspective," Kiel Working Papers 1409, Kiel Institute for the World Economy.
  4. Christian Merkl & Dennis J. Snower, 2007. "Escaping the Unemployment Trap � The Case of East Germany," Kiel Working Papers 1309, Kiel Institute for the World Economy.
  5. Petrongolo, Barbara & Pissarides, Christopher, 2000. "Looking Into The Black Box: A Survey Of The Matching Function," CEPR Discussion Papers 2409, C.E.P.R. Discussion Papers.
  6. Shigeru Fujita & Garey Ramey, 2005. "The Dynamic Beveridge Curve," Macroeconomics 0509026, EconWPA.
  7. Dennis J. Snower & Christian Merkl, 2006. "The Caring Hand that Cripples: The East German Labor Market after Reunification," American Economic Review, American Economic Association, vol. 96(2), pages 375-382, May.
  8. Merkl, Christian & Schmitz, Tom, 2010. "Macroeconomic Volatilities and the Labor Market: First Results from the Euro Experiment," IZA Discussion Papers 4924, Institute for the Study of Labor (IZA).
  9. 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.
  10. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  11. 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].
  12. Hagedorn, Marcus & Manovskii, Iourii, 2008. "The cyclical behavior of equilibrium unemployment and vacancies revisited," Working Paper Series 0853, European Central Bank.
  13. Alessio J. G. Brown & Christian Merkl & Dennis Snower, 2009. "An Incentive Theory of Matching," Kiel Working Papers 1512, Kiel Institute for the World Economy.
  14. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  15. 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.
  16. Christoffel, Kai & Kuester, Keith & Linzert, Tobias, 2009. "The role of labor markets for euro area monetary policy," Working Paper Series 1035, European Central Bank.
  17. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
  18. Robert E. Hall & Paul R. Milgrom, 2008. "The Limited Influence of Unemployment on the Wage Bargain," American Economic Review, American Economic Association, vol. 98(4), pages 1653-74, September.
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