Labor Force Status Dynamics in the German Labor Market - Individual Heterogeneity and Cyclical Sensitivity

32 Pages Posted: 24 Oct 2009

See all articles by Jochen Kluve

Jochen Kluve

Humboldt University of Berlin; RWI; IZA

Sandra Schaffner

RWI - Leibniz Institute for Economic Research

Christoph M. Schmidt

RWI - Leibniz-Insitut für Wirtschaftsforschung (RWI Essen); Ruhr-Universität Bochum (RUB); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR)

Date Written: September 1, 2009

Abstract

The aggregate average unemployment rate in a given country is essentially the result of individual workers’ transitions between the three core labor force states, employment, unemployment, and inactivity. The dynamics of these transitions depend both, on individual duration in a particular state and the transition probabilities between states. Individual transitions, in turn, depend on observable and unobserved factors. Simultaneously, person-specific dynamics may be influenced by swings of the business cycle. This paper analyzes these labor force status dynamics for the East and West German labor market, separately using comprehensive data on monthly transitions from the SOEP. The results show that the experience of high unemployment rates is more sensitive to cyclical behavior for certain demographic groups, specifically unskilled and young workers. Heterogeneity in unemployment and transition rates diff er between East and West Germany, as well as between the sexes. In East Germany, all demographic cells are almost entirely detached from the cycle. Women are less influenced by the cycle in their re-employment rate from unemployment to employment.

Keywords: Labor force, unemployment dynamics, business cycle, worker heterogeneity

JEL Classification: E32, J21, J64

Suggested Citation

Kluve, Jochen and Schaffner, Sandra and Schmidt, Christoph M., Labor Force Status Dynamics in the German Labor Market - Individual Heterogeneity and Cyclical Sensitivity (September 1, 2009). Ruhr Economic Paper No. 139, Available at SSRN: https://ssrn.com/abstract=1493157 or http://dx.doi.org/10.2139/ssrn.1493157

Jochen Kluve

Humboldt University of Berlin ( email )

Spandauer Str. 1
Berlin, D-10099
Germany

RWI ( email )

Essen
Germany

IZA

P.O. Box 7240
Bonn, D-53072
Germany

Sandra Schaffner (Contact Author)

RWI - Leibniz Institute for Economic Research ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

HOME PAGE: http://www.rwi-essen.de/schaffner

Christoph M. Schmidt

RWI - Leibniz-Insitut für Wirtschaftsforschung (RWI Essen) ( email )

Hohenzollernstraße 1-3
Essen, 45128
Germany
++49 201 8149-227 (Phone)
++49 201 8149-236 (Fax)

Ruhr-Universität Bochum (RUB)

GC 2/150
Universitätsstr. 150
D-44780 Bochum
Germany

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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