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Earnings and Employment Dynamics: Capturing Cyclicality using Mixed Frequency Data

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In this paper, we present a model of earnings dynamics that includes transitions in and out of employment as well as business cycle fluctuations. The model is estimated using the method of indirect inference and a mix of Swedish register, survey, and macro data. We find that the business cycle has a larger effect on transitions from unemployment to employment than on the risk of becoming unemployed. By simulating data from the model, we find that the business cycle has a relatively small impact on earnings inequality in Sweden and that women’s labor market outcomes are less sensitive to business cycle fluctuations compared to men’s. Finally, we find that economic crises have a more severe impact on young workers.

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  • Holmberg, Johan, 2021. "Earnings and Employment Dynamics: Capturing Cyclicality using Mixed Frequency Data," Umeå Economic Studies 991, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0991
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    More about this item

    Keywords

    Earning dynamics; Unemployment; Business cycles; Inequality;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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