IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/6226.html
   My bibliography  Save this paper

Sectoral Transformation, Turbulence, and Labour Market Dynamics in Germany

Author

Listed:
  • Burda, Michael
  • Bachmann, Ronald

Abstract

The secular rise of European unemployment since the 1960s is hard to explain without reference to structural change. This is especially true in Germany, where industrial employment has declined by more than 30% and service sector employment has more than doubled over the past three decades. Using individual transition data on West German workers, we document a marked increase in structural change and turbulence, in particular since 1990. Net employment changes resulted partly from an increase in gross flows, but also from an increase in the net transition "yield" at any given gross worker turnover. In growing sectors, net structural change was driven by accessions from nonparticipation rather than unemployment; contracting sectors reduced their net employment primarily via lower accessions from nonparticipation. While gross turnover is cyclically sensitive and strongly procyclical, net reallocation is countercyclical, meaning that recessions are associated with increased intensity of sectoral reallocation. Beyond this cyclical component, German reunification and Eastern enlargement appear to have contributed significantly to this accelerated pace of structural change.

Suggested Citation

  • Burda, Michael & Bachmann, Ronald, 2007. "Sectoral Transformation, Turbulence, and Labour Market Dynamics in Germany," CEPR Discussion Papers 6226, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6226
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP6226
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ronald Bachmann & Michael C. Burda, 2010. "Sectoral Transformation, Turbulence and Labor Market Dynamics in Germany," German Economic Review, Verein für Socialpolitik, vol. 11(1), pages 37-59, February.
    2. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150-150, March.
    3. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    4. Marimon, Ramon & Zilibotti, Fabrizio, 1999. "Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits," Economic Journal, Royal Economic Society, vol. 109(455), pages 266-291, April.
    5. Erica L. Groshen & Simon M. Potter, 2003. "Has structural change contributed to a jobless recovery?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Aug).
    6. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
    7. repec:oup:ecpoli:v:21:y:2006:i:45:p:5-59 is not listed on IDEAS
    8. Fallick, Bruce Chelimsky, 1996. "The hiring of new labor by expanding industries," Labour Economics, Elsevier, vol. 3(1), pages 25-42, August.
    9. Lars Ljungqvist & Thomas J. Sargent, 2004. "European Unemployment and Turbulence Revisited in a Matching Model," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 456-468, 04/05.
    10. Marimon, Ramon & Zilibotti, Fabrizio, 1998. "'Actual' versus 'virtual' employment in Europe Is Spain different?," European Economic Review, Elsevier, vol. 42(1), pages 123-153, January.
    11. Jovanovic, Boyan & Moffitt, Robert, 1990. "An Estimate of a Sectoral Model of Labor Mobility," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 827-852, August.
    12. Neal, Derek, 1999. "The Complexity of Job Mobility among Young Men," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 237-261, April.
    13. Candelon, Bertrand & Lutkepohl, Helmut, 2001. "On the reliability of Chow-type tests for parameter constancy in multivariate dynamic models," Economics Letters, Elsevier, vol. 73(2), pages 155-160, November.
    14. Gadi Barlevy, 2002. "The Sullying Effect of Recessions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(1), pages 65-96.
    15. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    16. D'Agostino, Antonello & Serafini, Roberta & Ward-Warmedinger, Melanie E., 2006. "Sectoral Explanations of Employment in Europe: The Role of Services," IZA Discussion Papers 2257, Institute of Labor Economics (IZA).
    17. F. Vella & G. Moscarini, 2004. "Aggregate Worker Reallocation and Occupational Mobility in the United States: 1976-2000," 2004 Meeting Papers 183, Society for Economic Dynamics.
    18. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-793, August.
    19. Rogerson, Richard, 1987. "An Equilibrium Model of Sectoral Reallocation," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 824-834, August.
    20. Rainer Winkelmann & Klaus Zimmermann, 1998. "Is job stability declining in Germany? Evidence from count data models," Applied Economics, Taylor & Francis Journals, vol. 30(11), pages 1413-1420.
    21. Bachmann, Ronald, 2005. "Labour market dynamics in Germany: Hirings, separations, and job-to-job transitions over the business cycle," SFB 649 Discussion Papers 2005-045, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    22. Gueorgui Kambourov & Iourii Manovskii, 2009. "Occupational Mobility and Wage Inequality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(2), pages 731-759.
    23. Olivier Blanchard, 2006. "European unemployment: the evolution of facts and ideas [‘The macroeconomics of low inflation’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 21(45), pages 6-59.
    24. Uta Schoenberg & Christina Gathmann, 2006. "How General is Specific Human Capital? Using Mobility Patterns to Study Skill Transferability in the Labor Market," 2006 Meeting Papers 598, Society for Economic Dynamics.
    25. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
    26. Krause, Michael U. & Lubik, Thomas A., 2006. "The cyclical upgrading of labor and on-the-job search," Labour Economics, Elsevier, vol. 13(4), pages 459-477, August.
    27. Bernd Fitzenberger & Ralf A. Wilke, 2010. "Unemployment Durations in West Germany Before and After the Reform of the Unemployment Compensation System during the 1980s," German Economic Review, Verein für Socialpolitik, vol. 11(3), pages 336-366, August.
    28. Peter J. Kuhn (ed.), 2002. "Losing Work, Moving On: International Perspectives on Worker Displacement," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number lwmo.
    29. Caballero, Ricardo J & Hammour, Mohamad L, 1994. "The Cleansing Effect of Recessions," American Economic Review, American Economic Association, vol. 84(5), pages 1350-1368, December.
    30. David Greenaway & Richard Upward & Peter Wright, 2002. "Sectoral Transformation and Labour Market Flows," International Economic Association Series, in: David Greenaway & Richard Upward & Katharine Wakelin (ed.), Trade, Investment, Migration and Labour Market Adjustment, chapter 6, pages 93-114, Palgrave Macmillan.
    31. Burda, Michael & Wyplosz, Charles, 1994. "Gross worker and job flows in Europe," European Economic Review, Elsevier, vol. 38(6), pages 1287-1315, June.
    32. Robert E. Hall, 2006. "Job Loss, Job Finding and Unemployment in the US Economy over the Past Fifty Years," NBER Chapters, in: NBER Macroeconomics Annual 2005, Volume 20, pages 101-166, National Bureau of Economic Research, Inc.
    33. Abraham, Katharine G & Katz, Lawrence F, 1986. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 507-522, June.
    34. Ad van Riet & Ekkehard Ernst & Christophe Madaschi & Fabrice Orlandi & Alvaro Santos Rivera & Benoît Robert & Jörg Döpke & Constantina Backinezos & Ioanna Bardakas & Esther Gordo Mora & Christian Baro, 2004. "Sectoral specialisation in the EU a macroeconomic perspective," Occasional Paper Series 19, European Central Bank.
    35. Stefan Bender & Till von Wachter, 2006. "In the Right Place at the Wrong Time: The Role of Firms and Luck in Young Workers' Careers," American Economic Review, American Economic Association, vol. 96(5), pages 1679-1705, December.
    36. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, January.
    37. Victor R. Fuchs, 1980. "Economic Growth and the Rise of Service Employment," NBER Working Papers 0486, National Bureau of Economic Research, Inc.
    38. AMOS GOLAN & JULIA LANE & ERIKA McENTARFER, 2007. "The Dynamics of Worker Reallocation within and across Industries," Economica, London School of Economics and Political Science, vol. 74(293), pages 1-20, February.
    39. Bernd Fitzenberger & Astrid Kunze, 2005. "Vocational Training and Gender: Wages and Occupational Mobility among Young Workers," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 21(3), pages 392-415, Autumn.
    40. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    41. Burda, Michael C. & Mertens, Antje, 2001. "Estimating wage losses of displaced workers in Germany," Labour Economics, Elsevier, vol. 8(1), pages 15-41, January.
    42. repec:bla:germec:v:11:y:2010:i::p:336-366 is not listed on IDEAS
    43. Orlandi, Fabrice & Barontini, Christian & Cassidy, Mark & Trento, Sandro & Walch, Erik & Buitenkamp, Bouke & Wagner, Karin & Reis, Hugo & Herrala, Risto & Sethi, Faisel & Gordo Mora, Esther & Bardakas, 2004. "Sectoral specialisation in the EU: a macroeconomic perspective," Occasional Paper Series 19, European Central Bank.
    44. Bruce Fallick & Charles A. Fleischman, 2004. "Employer-to-employer flows in the U.S. labor market: the complete picture of gross worker flows," Finance and Economics Discussion Series 2004-34, Board of Governors of the Federal Reserve System (U.S.).
    45. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72(6), pages 584-584.
    46. Richard Rogerson, 2005. "Sectoral Shocks, Specific Human Capital and Displaced Workers," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 89-105, January.
    47. Bender, Stefan & Haas, Anette & Klose, Christoph, 2000. "IAB Employment Subsample 1975-1995 Opportunities for Analysis Provided by the Anonymised Subsample," IZA Discussion Papers 117, Institute of Labor Economics (IZA).
    48. Burgess, Simon M, 1993. "A Model of Competition between Unemployed and Employed Job Searchers: An Application to the Unemployment Outflow Rate in Britain," Economic Journal, Royal Economic Society, vol. 103(420), pages 1190-1204, September.
    49. Gueorgui Kambourov & Iourii Manovskii, 2008. "Rising Occupational And Industry Mobility In The United States: 1968-97," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 41-79, February.
    50. Gathmann, Christina & Schönberg, Uta, 2006. "How General Is Specific Human Capital?," IZA Discussion Papers 2485, Institute of Labor Economics (IZA).
    51. Farber, Henry S., 1999. "Mobility and stability: The dynamics of job change in labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 37, pages 2439-2483, Elsevier.
    52. Donghoon Lee & Kenneth I. Wolpin, 2006. "Intersectoral Labor Mobility and the Growth of the Service Sector," Econometrica, Econometric Society, vol. 74(1), pages 1-46, January.
    53. Michael Bruno & Jeffrey D. Sachs, 1985. "Economics of Worldwide Stagflation," NBER Books, National Bureau of Economic Research, Inc, number brun85-1.
    54. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
    55. Velling, Johannes & Bender, Stefan, 1994. "Berufliche Mobilität zur Anpassung struktureller Diskrepanzen am Arbeitsmarkt," ZEW Discussion Papers 94-19, ZEW - Leibniz Centre for European Economic Research.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:zbw:rwirep:0005 is not listed on IDEAS
    2. Ronald Bachmann & Michael C. Burda, 2007. "Sectoral Transformation, Turbulence, and Labor Market Dynamics in Germany," Ruhr Economic Papers 0005, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    3. repec:bla:germec:v:11:y:2010:i::p:37-59 is not listed on IDEAS
    4. Rogerson, Richard & Shimer, Robert, 2011. "Search in Macroeconomic Models of the Labor Market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 7, pages Pages: 61, Elsevier.
    5. Yashiv, Eran, 2007. "Labor search and matching in macroeconomics," European Economic Review, Elsevier, vol. 51(8), pages 1859-1895, November.
    6. Lalé, Etienne, 2017. "Worker reallocation across occupations: Confronting data with theory," Labour Economics, Elsevier, vol. 44(C), pages 51-68.
    7. Etienne Lalé, 2018. "Turbulence and the employment experience of older workers," Quantitative Economics, Econometric Society, vol. 9(2), pages 735-784, July.
    8. Auray Stéphane & Fuller David & Lkhagvasuren Damba & Terracol Antoine, 2017. "Dynamic Comparative Advantage, Directed Mobility Across Sectors, and Wages," Working Papers 2017-59, Center for Research in Economics and Statistics.
    9. Ronald Bachmann & Peggy Bechara & Christina Vonnahme, 2020. "Occupational Mobility in Europe: Extent, Determinants and Consequences," De Economist, Springer, vol. 168(1), pages 79-108, March.
    10. Giovanni Gallipoli & Gianluigi Pelloni, 2013. "Macroeconomic Effects of Job Reallocations: A Survey," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 5(2), pages 127-176, December.
    11. Ronald Bachmann & Peggy Bechara, 2019. "The Importance of Two‐Sided Heterogeneity for the Cyclicality of Labour Market Dynamics," Manchester School, University of Manchester, vol. 87(6), pages 794-820, December.
    12. Carlos Carrillo‐Tudela & Ludo Visschers, 2023. "Unemployment and Endogenous Reallocation Over the Business Cycle," Econometrica, Econometric Society, vol. 91(3), pages 1119-1153, May.
    13. repec:eee:labchp:v:3:y:1999:i:pb:p:2711-2805 is not listed on IDEAS
    14. Maximiliano Dvorkin, 2013. "Sectoral Shocks, Reallocation and Unemployment in a Model of Competitive Labor Markets," 2013 Meeting Papers 1229, Society for Economic Dynamics.
    15. Heaton, Chris & Oslington, Paul, 2010. "Micro vs macro explanations of post-war US unemployment movements," Economics Letters, Elsevier, vol. 106(2), pages 87-91, February.
    16. repec:rim:rimwps:27-08 is not listed on IDEAS
    17. Costain, James S. & Reiter, Michael, 2008. "Business cycles, unemployment insurance, and the calibration of matching models," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1120-1155, April.
    18. repec:hum:wpaper:sfb649dp2005-034 is not listed on IDEAS
    19. Benedikt Herz & Thijs van Rens, 2020. "Accounting for Mismatch Unemployment," Journal of the European Economic Association, European Economic Association, vol. 18(4), pages 1619-1654.
    20. Carlos Carrillo-Tudela & Bart Hobijn & Powen She & Ludo Visschers, 2014. "The Extent and Cyclicality of Career Changes: Evidence for the UK (first version)," Edinburgh School of Economics Discussion Paper Series 246, Edinburgh School of Economics, University of Edinburgh.
    21. Álvarez de Toledo, Pablo & Núñez, Fernando & Usabiaga, Carlos, 2014. "An empirical approach on labour segmentation. Applications with individual duration data," Economic Modelling, Elsevier, vol. 36(C), pages 252-267.
    22. Carlos Usabiaga & Pablo Álvarez de Toledo & Fernando Núñez, 2013. "Labour Market Segmentation, Clusters, Mobility And Unemployment Duration With Individual Microdata," EcoMod2013 5688, EcoMod.
    23. Carrillo-Tudela, Carlos & Hobijn, Bart & She, Powen & Visschers, Ludo, 2016. "The extent and cyclicality of career changes: Evidence for the U.K," European Economic Review, Elsevier, vol. 84(C), pages 18-41.
    24. Simona E. Cociuba & James C. MacGee, 2018. "Demographics and Sectoral Reallocations: A Search Theory with Immobile Workers," University of Western Ontario, Departmental Research Report Series 20182, University of Western Ontario, Department of Economics.
    25. Scott Schuh & Robert K. Triest, 1998. "Job reallocation and the business cycle: new facts for an old debate," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 42(Jun), pages 271-357.

    More about this item

    Keywords

    Gross worker flows; Sectoral and occupational mobility; Turbulence;
    All these keywords.

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:6226. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.