This paper applies Verdoorn's and Okun's law to derive efficient estimates of the employment and unemployment threshold in the Unified Germany. The analysis is built on a disaggregated dataset of regional labour markets, where spatial dependencies are taken into account. Especially, a spatial SUR model is proposed utilising the eigenfunction decomposition approach suggested by Griffith (1996, 2000 ). The thresholds turn out to be unstable over time. However, minimum output growth sufficient for a rise in employment is below the level needed for a drop in the unemployment rate. If spatial effects are ignored, the thresholds seem to be markedly overrated. [ABSTRACT FROM AUTHOR]
Uncertainty shocks are found to affect labour market outcomes adversely. Most studies interrelate non-convex labour adjustment costs with the propagation of macroeconomic uncertainty to the labour market. I show that non-convex labour adjustment costs differ by establishment size in Germany. Hence, uncertainty shocks should affect large and small establishments differently. Therefore, this article studies the effects of uncertainty shocks on employment adjustments in large and small establishments employing four structural vector auto-regressive models for Germany from 1992 to 2014. These four models estimate the effects of uncertainty shocks on employment, worker flows, job flows, as well as worker churn in establishments with fewer than 100 and with at least 100 employees. The results suggest that uncertainty shocks trigger considerable employment fluctuations in large establishments while they barely affect small establishments. Furthermore, large establishments adjust their labour input by delaying the replacement of workers. [ABSTRACT FROM AUTHOR]