The German labour market: Low worker flows and large volatilities

Abstract

"Business cycle fluctuations are associated with large ups and downs of the labour market (see Shimer 2005 for the US). The increased probability of losing a job and the reduced probability of finding a job in a recession may be considered as one of the major costs of an economic downturn. Nevertheless, there is only very limited knowledge of cross-country differences of labour market dynamics over the business cycle. Most economists probably expect that - due to rigidities on the German labour market - the business cycle volatility of the labour market is smaller in Germany than in the US. However, our research shows that the opposite is true. A comparison of the labour market in Germany and in the US (from 1980 to 2004) shows that the business cycle volatility of the labour market in Germany is about twice as large as in the US. At the same time worker flows are much lower in Germany than in the US (this phenomenon has been labelled as sclerosis). We argue that sclerosis and large labour market volatilities are two sides of the same coin." (Author's abstract, IAB-Doku) ((en))

Cite article

Gartner, H., Merkl, C. & Rothe, T. (2012): The German labour market: Low worker flows and large volatilities. In: VOX No. 08.08.2012, p. 1-1.