The cyclicality of worker flows: Evidence from Germany

Abstract

"The development of unemployment and employment is strongly determined by labor market flows. This dissertation analyzes worker flows, i.e. job findings and separations, over the business cycle. The analysis uses process-generated micro data provided by the Institute for Employment Research (IAB), which allow gaining comprehensive insights into labor market dynamics in Germany.<br> The first essay investigates the effects of time aggregation, which is of particular importance in the context of flow data. If labor market states are measured on larger intervals, it is likely to neglect transitions that are reversed within two measurement points. The daily data base for Germany allows quantifying this bias by comparing labor market transitions that are calculated on different frequencies. The main result is that a monthly measurement of labor market states underestimates total worker flows by 10%. In contrast, a theoretical correction approach implies an underestimation of only 3%. The time aggregation bias in the job finding rate shows a procyclical behavior, while the time aggregation bias in the separation rate appears to be relatively unaffected by the economic situation.<br> The second essay studies German worker flows in response to structural shocks. The results show various patterns of how the labor market adjusts to the steady state. In particular, the transmission channel varies with the different impulses. After a technology shock, unemployment adjusts gradually via the job finding margin. A monetary policy shock triggers a hump-shaped reaction, which is also determined by the job finding rate. In contrast, a fiscal policy shock leads to a short-lived variation in unemployment, where the separation rate plays a larger role.<br> The third essay deals with the modeling of the job finding margin. Job findings are typically represented by a matching function, where the number of matches depends on the stocks of unemployment and vacancies. There is evidence that this approach is empirically relevant - both in standard form and in extended form. The estimation results are then replicated by simulations of a theoretical model, which describes a firm's hiring process. This model implies an alternative interpretation of the matching function because it assumes that vacancies merely appear as a worker attraction device, while the number of matches is determined by the idiosyncratic productivity of the applicants." (Author's abstract, IAB-Doku) ((en))

Cite article

Nordmeier, D. (2013): The cyclicality of worker flows: Evidence from Germany. (IAB-Bibliothek 346), Bielefeld: Bertelsmann, 130 p. DOI:10.3278/300826w