Florian Hoffmann

Unemployment in the Great Recession: A Comparison of Germany, Canada, and the United States

This paper looks at the surprisingly different labor market performance of the United States, Canada, Germany, and several other OECD countries during and after the Great Recession of 2008–9. A first important finding is that the large employment swings in the construction sector linked to the boom and bust in US housing markets is an important factor behind the different labor market performances of the three countries. We also find that cross-country differences among OECD countries are consistent with a conventional Okun relationship linking gross domestic product growth to employment performance.

Burdett-Mortensen Model of On-the-Job Search with Two Sectors

The focus of this paper is on the steady state of a two-sector economy with undirected search where employed and unemployed workers can search for jobs, both within a sector and between the sectors. As in the one-sector model, on-the-job search generates wage dispersion among homogeneous workers. The analysis of the two-sector model uncovers a property called constant tension that is responsible for analytical tractability. We characterize the steady state in all cases with constant tension. When time discounting vanishes, constant tension yields the endogenous separation rate in each sector as a linear function of the present value for a worker. The one-sector economy automatically satisfies constant tension, in which case the linear separation rate implies that equilibrium offers of the worker value are uniformly distributed. Constant tension also has strong predictions for worker transitions and value/wage dispersion, both within a sector and between the two sectors. When constant tension does not hold, we compute the steady state numerically and illustrate its properties.

Does Automation Drive the Labor Market

In this note we question the emerging view that automation is a primary driver of wage and employment outcomes in labor markets.

Long-Run Sectoral Reallocation, Job to Job Transitions, and Earnings Inequality: An Empirical Investigation

Using data from the Census, ACS and the CPS, we document that a large part of long-run reallocation of labor from the goods to the service sector took place within narrowly defined groups of workers. In particular, sectoral reallocation reflects a labor market trend that is distinct from the automatization of the goods sector and the increase in female labor force participation. A relative increase in direct monthly job-to-job transitions from the goods to the service sector can explain a sizeable share of the rise in service-sector employment. This finding is robust to the methodology of adjusting for trend breaks in monthly transition rates as measured from the CPS. We use this result to test a central empirical prediction of job-search theory with on-the-job search: that there is an intrinsic link between the earnings structure and the rates at which employed workers change jobs. Using two different empirical strategies and data disaggregated to various levels we find robust evidence that the earnings distribution in the service sector became more unequal relative to the goods sector when the rate at which workers flew into the service sector rose. This relationship is particularly strong among age groups with stable labor force participation rates. We document some evidence based on the distribution of earnings changes computed from the SIPP against the hypothesis that our results are driven by worker sorting on unobserved heterogeneity.