Oil price shocks and labor market fluctuations

Javier Ordóñez, Hector Sala and José Silva

Working Papers from Department of Applied Economics at Universitat Autonoma of Barcelona

Abstract: We examine the impact of real oil price shocks on labor market flows in the U.S. We first use smooth transition regression (STR) models to investigate to what extent oil prices can be considered as a driving force of labor market fluctuations. Then we develop and calibrate a modified version of Pissarides’ (2000) model with energy costs, which we simulate in response to shocks mimicking the behavior of the actual oil price shocks. We find that (i) these shocks are an important driving force of job market flows; (ii) the job finding probability is the main transmission mechanism of such shocks; and (iii) they bring a new amplification mechanism for the volatility and should thus be seen as complementary of labor productivity shocks. Overall we conclude that shocks in oil prices cannot be neglected in explaining cyclical labor adjustments in the U.S.

Keywords: Oil Prices; Unemployment; Vacancies; Business Fluctuations. (search for similar items in EconPapers)
JEL-codes: E22 E32 J63 J64 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2010-07
New Economics Papers: this item is included in nep-dge, nep-ene and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Oil Price Shocks and Labor Market Fluctuations (2011)
Working Paper: Oil Price Shocks and Labor Market Fluctuations (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:uab:wprdea:wpdea1005

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