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Worker Churn in the Cross Section and Over Time: New Evidence from Germany

Ruediger Bachmann (), Christian Bayer (), Christian Merkl (), Stefan Seth, Heiko Stüber () and Felix Wellschmied

No 6702, CESifo Working Paper Series from CESifo Group Munich

Abstract: Worker churn, that is, worker flows in excess of job flows, is procyclical in the German labor market. To understand this procyclicality, we study the plant-level connection of churn and employment growth, using the new Administrative Wage and Labor Market Flow Panel from 1975 to 2014, and find that churn rises in the absolute value of employment growth. Analyzing this V-shaped churn-employment growth nexus by worker skill, age, and tenure, we establish that churn is unlikely to result from plant reorganization but rather from the correction of labor market mismatches. Using a simple dynamic labor demand framework, we argue that the cross-sectional evidence on churn can be interpreted as manifestations of idiosyncratically stochastic separation shocks in conjunction with a time-to-hire friction. These shocks become larger and more predictable during booms leading to procyclical churn, which, as we show, (1) increases almost uniformly across the employment growth distribution, and (2) stems almost exclusively from job-to-job transitions. Procyclical churn, thus, reflects a more active reshuffling of workers towards individually better matches in booms.

Keywords: worker churn; employment growth; job flows; worker flows; labor demand; separation shocks; job-to-job transitions; aggregate fluctuations (search for similar items in EconPapers)
JEL-codes: E20 E24 E32 J23 J63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lma and nep-mac
Date: 2017
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