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Uncertainty shocks and employment fluctuations in Germany: the role of establishment size

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  • Tim Kovalenko

Abstract

Uncertainty shocks are found to adversely affect labor market outcomes. Most studies attribute labor adjustments costs for the propagation of macroeconomic uncertainty to the labor market. Given that large establishments in Germany face higher labor adjustments cost, they should be affected more strongly by these shocks. Therefore, this paper studies the effects of uncertainty shocks on employment adjustments in large and small establishments employing four structural vector auto-regressive models with quarterly data for Germany in the period 1991-2014. These four models estimate effects of uncertainty shocks on employment, worker flows, job flows as well as worker churn, both for establishments with less than 100 and with at least 100 employees. The results suggest that uncertainty shocks induce considerable employment fluctuations in large establishments, while they have barely an effect on small establishments. Furthermore, large establishments adjust their labor input in response to an uncertainty shock by delaying the replacement of workers who leave these establishments.

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  • Tim Kovalenko, 2021. "Uncertainty shocks and employment fluctuations in Germany: the role of establishment size," Working Papers 212, Bavarian Graduate Program in Economics (BGPE).
    • Handle: RePEc:bav:wpaper:212_kovalenko
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    Keywords

    homeownership; housing subsidies; residential location choice; suburbanization;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy

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