On the Measurement of Mismatch

This paper introduces and examines a definition of an equilibrium rate of unemployment that can be used as mismatch indicator, too. In contrast to existing indicators this measurement method is based directly on the Beveridge-Curve. An application of the indicator to nine OECD countries leads to diverging results. Most of the considered countries have experienced increasing mismatch in the seventies and decreasing mismatch in the nineties. The latter result is somewhat surprising, since mismatch was expected to be increasing in the nineties. However, the estimates for Germany are against this international trend, due to the fact that mismatch has increased steadily since the middle of the sixties.Mismatch, Beveridge-Curve, equilibrium unemployment

Are Recessions Good for Educational Attainment?

In this study, we examine how economic performance during the child-specific primary school phase, during which teachers make recommendations regarding secondary school level, affects the educational level achieved ultimately by these children. Using data for Germany, we find that an economic downturn, coupled with increased unemployment, affects children's education attainment negatively. In terms of monetary units, the average effect of the 1993 German recessionon children's educational attainment corresponds to a loss of average monthly household equivalence income of about 50%. A second important conclusion is that children who live in regions that experience poor economic performance over longer periods are, on average, less educated than children who live in more affluent regions. Since human capital is a determinant of economic growth, declining school performance ultimately hampers future growth potential.educational attainment, educational tracking, macroeconomic uncertainty, family structure, intergenerational link, parental labor supply

Regional Labor Markets and Aging in Germany

This paper analyzes how the aging labor force a¤ects the unem- ployment rate at the regional level in Germany. A theoretical model of equilibrium unemployment with spatial labor market interactions is used to study the e¤ects of age-related changes in job creation and job destruction. Using data for 343 districts, we then examine empirically the consequences of an aging labor force for the local labor markets in Germany. We apply di¤erent estimation techniques to a spatial and time dynamic panel data model. According to the estimates, aging causes an increase in job destruction. In addition, aging in the local labor market increases job creation, while the spatial aging e¤ect on job creation in the local district is negative.Regional Unemployment, Vacancies and Separations, Job Creation, Regional Mobility, Spatial Interactions and Matching, Aging of the Labor Force

The Distribution of Unemployment by Age and the Unemployment Rate - A Puzzle?

This paper examines the effects of the distribution of unemployment by age on the level of unemployment. We provide an extension of the standard equilibrium unemployment model that allows for age dependent job finding probabilities and quit rates. In the empirical part of the paper we apply a panel estimator on data for a set of OECD countries to test the implications of the theoretical model. The results provide the somewhat surprising evidence that the distribution of unemployment by age has a hump-shape effect on the unemployment rate.Distribution of Unemployment by Age, Duration of Unemployment

Crime and European Labour Market Policy

In this paper we investigate the effects of labour market policy on several types of criminal offences for fifteen European countries. The main results are the following: Firstly, the results change markedly if we control for unobserved heterogeneity. In the context of criminal offences the estimates seem to be reliable only if we apply fixed effects instead of simple pool specifications. Secondly, the effects of labour market policy vary considerably with respect to the different types of criminal offences and cannot be subdivided into unambiguous effects on property crimes and violent crimes, respectively. Thirdly, the proxy variables for labour market policy we consider have different importance with respect to their effect on criminal offences. Benefit replacement rate, benefit duration, and average years of schooling seem to be important, whereas active labour market policy appears not to be linked to crime. The combination of a shorter benefit duration and higher replacement rate, like in the Nordic countries, seems to be a "crime reducing" combination.Unemployment, labour market policy, illegal behaviour, time allocation

Recommendation, Class Repeating, and Children's Ability: German School Tracking Experiences

While the 2006 Progress in International Reading Literacy Study assesses the average ability of German primary school students as being higher than average, the Programme for International Student Assessment studies (2000, 2003, 2006) ranks German secondary school students at a considerably lower level. Using data from the German Socio-Economic Panel, this paper examines whether a teacher's recommendation for the secondary school track and class repeating are causes for these ability differences. According to the estimates, failures as a result of teachers'recommendations given at the end of primary school are an important reason for the differences between the two types of studies. Being required to repeat a school class amplifies the inefficient management of children's abilities. In addition, we find evidence that regional economic performance at the time the recommendation is made affects the decision for the tracking path.education attainment, school system, educational tracking

How the Distribution of Unemployment by Duration Affects the Unemployment Rate

This paper examines the effects of the distribution of unemployment by duration on the level of unemployment. It explores one central as- sumption that is observed empirically: when the share of long-term (short-term) unemployed increases, the unemployment rate increases (decreases). By embodying this assumption in a standard equilibrium unemployment model we characterize the joint behavior of unemploy- ment and the distribution of unemployment by duration. In the theoretical part of the paper an extension of the standard equilibrium unemployment model is provided where the average job finding prob- ability depends on the distribution of unemployment by duration. In the empirical section we estimate a panel data model for 16 OECD countries to test the implications of the theoretical model. The main results are: First, in a steady state equilibrium the flow rates are larger, the larger the share of short-term unemployed. Second, out of steady state the unemployment rate increases (decreases) with the share of long-term (short-term) unemployed. Third, the larger the duration dependent job finding probabilities the larger the share of short term unemployed. Fourth, panel estimates for 16 OECD countries provide robust and significant evidence that an increase in the share of short- term (long-term) unemployment decreases (increases) the unemploy- ment rate. Therefore, the empirical evidence supports our hypotheses whereby (a) the reemployment probability decreases with an increasing spell of unemployment and (b) average exit rates have international differences. Hence, the different experiences with unemployment on both sides of the Atlantic can be explained by observed aggregated duration dependence and differences in the average exit rate.Distribution of Unemployment by Duration, Duration Dependence

Labour Market Institutions and Unemployment Revisited

In this paper the effects of institutional variables on unemployment are reinvestigated for nine OECD countries. The used framework allow for country specific estimates. In this case, the impact of the considered institutional variables on unemployment may differ across countries, not only in absolute terms but also in terms of sign. The main results are the following: First, there are remarkable differences across countries with respect to the estimated effects. Most of the considered variables have at least in one of the considered countries an unexpected effect. Secondly, after a careful examination of the results we identify complex interdependencies between the institutional variables, which bear resemblance to the interaction hypothesis. Thirdly, the estimates with respect to the minimum wage do confirm the theory of monopsonistic labour markets. Fourthly, based on a cross country comparison some evidence is found that some of the considered labour market institutions have a hump-shaped or U-shaped relation to the unemployment rate. All things considered, the results make strong distinctions clear, and the different economies should be extremely cautious to make a copy of the level of a certain labour market institution of the neighbours.Beveridge-Curve, employment determination, labour market rigidities, social security

Parental Labor Market Success and Children's Education Attainment

This study examines the effects of parental labor market activities on children's education attainment. In contrast to the existing literature we consider parental experiences until the children graduate from school. In addition, the effects of the regional economic environment during teacher's decision about the secondary school track are analyzed. Using data drawn from the German Socio-Economic Panel an ordered probit estimator is used to model children's education attainment. With respect to parental labor market participation we find that father's full-time and mother's part-time employment have significant positive effects on children's education attainment. Furthermore, we obtain evidence that the regional GDP growth rate and the regional unemployment rate when children are 10 years old are significantly related to the education that these children ultimately achieve. Our interpretation is that regional economic conditions affect teachers'recommendations for the secondary school track, which are given during the last year of primary school. The results reveal the less successful parents are on the labor market, the lower the average education level of their children. A second important conclusion is that children who live in regions which experience a poor economic performance over a longer period are, on average, less educated than children who live in more affluent regions.education attainment, parental labor supply, macroeconomic uncertainty, family structure, intergenerational link

Subjective Well-Being and the Duration of Aggregate Unemployment in Europe

This study examines whether the distribution of aggregate unemployment by duration affects individual well-being. Two hypotheses are provided to explain how the shares of short-term (up to 3 months) and long-term (more than 1 year) unemployed people could affect the well-being of the employed and unemployed: The severity hypothesis and the flow hypothesis. Using data from almost 300,000 individuals from 11 EU countries, an ordered probit estimator is used to analyze the impact of the distribution of aggregate unemployment by duration on individual well-being. We find significant evidence in favor of both the severity and the flow hypotheses. Hence, the fear of losing (or not finding) a job is more detrimental when the prospect is to remain unemployed for a longer time. At some point, however, both the employed and unemployed adapt to unemployment at the macro level. Using an alternative specification that allows for a duration-specific risk of becoming/being unemployed, we arrive at similar conclusions. What seems to bother people is thus not just the risk of becoming/remaining unemployed, but more so the risk of being out of work for 4 to 12 months.unemployment, unemployment duration, life satisfaction, happiness