The Era of the U.S.-Europe Labor Market Divide: What can we learn?
Philip Jung () and
Moritz Kuhn
MPRA Paper from University Library of Munich, Germany
Abstract:
Comparing labor markets in the United States and Germany as Europe’s largest economy over the period from 1980−2004 uncovers three stylized differences: (1) Germany’s mean transition rates from unemployment to employment (UE) were lower by a factor of 5 and transition rates from employment to unemployment (EU) were lower by a factor of 4. (2) The volatility of the UE rate was equal in both countries, but the EU rate was 2.3 times more volatile in Germany. (3) In Germany EU flows contributed 60−70% to unemployment volatility, whereas in the U.S. they contributed only 30−40%. Using a search and matching model we show theoretically that the joint analysis of first and second moments offers general identification restrictions on the underlying causes for these differences. We find that a lower efficiency in the matching process can consistently explain the facts while alternative explanations such as employment protection, the benefit system, union power, or rigid earnings can not. We document that a lower matching efficiency due to lower occupational and regional mobility in Germany finds strong support in the data. Finally, we show that the highlighted matching friction leads in the model calibrated to the German economy to a substantial amplification and propagation of shocks.
Keywords: Business Cycle Fluctuations; Labor Market Institutions; Unemployment; Endogenous Firing (search for similar items in EconPapers)
JEL-codes: E02 E24 E32 (search for similar items in EconPapers)
Date: 2011-07-19
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/32322/1/MPRA_paper_32322.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/32357/1/MPRA_paper_32357.pdf revised version (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:32322
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().