Labor Reallocation, Employment, and Earnings: Vector Autoregression Evidence

We present time series evidence for the USA 1993–2013 on the relationship between labor reallocation, employment, and earnings using a vector autoregression framework. We find that an increase in labor market churn by 1 percentage point predicts that employment will increase by 100,000–560,000 jobs,...

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Bibliographic Details
Published inLabour (Rome, Italy) Vol. 33; no. 4; pp. 463 - 487
Main Authors Hyatt, Henry R., McElroy, Tucker S.
Format Journal Article
LanguageEnglish
Published Oxford Blackwell Publishing Ltd 01.12.2019
Subjects
Destruction
Earnings
Economic models
Employment
Labor market
Regression analysis
Time series
Unemployment
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Summary:We present time series evidence for the USA 1993–2013 on the relationship between labor reallocation, employment, and earnings using a vector autoregression framework. We find that an increase in labor market churn by 1 percentage point predicts that employment will increase by 100,000–560,000 jobs, lowering the unemployment rate by 0.05–0.25 percentage points. Job destruction does not predict changes in employment but a 1 percentage point increase in job destruction leads to an increase in unemployment 0.14–0.42 percentage points. We find mixed results on the relationship between labor reallocation rates and earnings.
ISSN:1121-7081
1467-9914
DOI:10.1111/labr.12153