Decomposing Beveridge curve dynamics by correlated unobserved components: The impact of labour market reforms in Germany
Sabine Klinger () and
Enzo Weber
VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association
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.
JEL-codes: C32 E24 E32 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-lab and nep-mac
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Citations: View citations in EconPapers (1)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100499
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