Decomposing Beveridge curve dynamics by correlated unobserved components

Sabine Klinger () and Enzo Weber

No 480, University of Regensburg Working Papers in Business, Economics and Management Information Systems from University of Regensburg, Department of Economics

Abstract: Between 1979 and 2009, the German labour market moved along a Beveridge curve with changing slope that used to shift outwards but shifted inwards after severe labour market reforms had come into force. We analyse these dynamics and focus on the macroeconomic outcome of the reforms. For that purpose, we construct a new empirical model that links equilibrium unemployment theory to a flexible unobserved components model: we disentangle permanent and transitory components of matching efficiency and separation rate as well as unemployment and vacancies. Cointegration and identification are addressed. We find that matching efficiency and separation rate each account for about half of the inward shift. Thereby, the increase in trend matching efficiency is extraordinary and testifies to a permanent improvement on the labour market. Its visibility, however, was retarded by an overlay with a structural increase in tightness.

Keywords: Beveridge curve; worker flows; tightness; unobserved components; Hartz reforms (search for similar items in EconPapers)
JEL-codes: C32 E24 E32 J2 J69 (search for similar items in EconPapers)
Date: 2014-05-09
New Economics Papers: this item is included in nep-lab and nep-mac
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Decomposing Beveridge Curve Dynamics By Correlated Unobserved Components (2016)
Working Paper: Decomposing Beveridge curve dynamics by correlated unobserved components (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:bay:rdwiwi:29927

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