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The COVID-19 pandemic caused a significant decline in output, as well as economic policies aimed at mitigating the negative effects of the pandemic. Both of these factors had an impact on the labour market. This paper investigates changes in employment across groups of workers during the coronavirus pandemic in Poland and the effect of output on these changes. Firstly, it examines changes in employment growth rates across different groups of workers in 2020. Secondly, the paper analyses the impact of the coronavirus crisis on employment by comparing actual and predicted employment growth during the pandemic period (2020). Using Okun’s law, Ordinary Least Squares, and quarterly data, the elasticities of employment growth with respect to GDP growth in the pre-pandemic period (2003–2019) are calculated. These elasticities are then used to estimate projected employment growth during the pandemic. The results suggest that the total employment response to output change was relatively small, compared to the historical pattern. However, the response was unequal across groups of workers. The youngest workers, particularly women, and those with temporary employment contracts were most affected by the pandemic.

The estimation of potential output is at the heart of the ongoing debate on the reformulation of fiscal rules in the European Union as it is an essential variable for their application. Spain constitutes a striking case, with a small and even positive output gap along with one of the highest unemployment rates in the European Union. To resolve this contradiction, in this article we estimate the potential output of the Spanish economy for the period 1987Q2–2022Q4 by means of the Updated Okun Method. Our results indicate that both the output gap and the cyclically adjusted balance are much higher than what European institutions estimate. Consequently, Spain has much more fiscal space to implement expansionary fiscal policies. [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]

This paper studies how tax‐and‐transfer progressivity influences aggregate fluctuations when interacting with household heterogeneity. Using a simple static model of the extensive margin labor supply, we analytically characterize how a degree of progressivity influences differential labor supply responses to aggregate conditions across heterogeneous households. We then build a quantitative dynamic general equilibrium model with both idiosyncratic and aggregate productivity shocks and show that it delivers moderately procyclical average labor productivity and a large cyclical volatility of aggregate hours relative to output. Our quantitative exercises suggest that progressivity at the bottom of the income distribution shaped by the phasing out of transfers is key for these findings. Finally, we provide suggestive empirical evidence on the heterogeneity of employment responses across the wage distribution. [ABSTRACT FROM AUTHOR]

This article studies the impact of the Great Recession on the relationship between reallocation and productivity dynamics in Lithuania. Using detailed micro-level data, we first document the aggregate contribution of firm dynamics and employment reallocation to productivity growth. Next, we estimate firm-level regressions to confirm the findings and to perform a heterogeneity analysis. The analysis shows that productivity shielded firms from exit, and that this relationship became stronger during the Great Recession. Moreover, we demonstrate that more productive firms experienced on average lower employment losses, especially during the economic slump. Taken together, our results suggest that reallocation was productivity-enhancing during the Great Recession. However, the analysis also indicates that the intensity varied with the sector's dependence on external financing or international trade as well as market concentration. [ABSTRACT FROM AUTHOR]

We identify the main shock driving fluctuations in long‐horizon productivity expectations, consistent with theories of TFP news. The identified shock induces strong comovement patterns in output, consumption, investment, employment, and stock prices even though TFP does not change significantly for more than 2 years. A labor search model in which wages are determined by a cash‐flow sharing rule, rather than the present value of match surplus, matches the observed responses to the news shock. The model also matches the empirical patterns of vacancies, labor force participation, hours, and job‐finding rates. The proposed wage rule is consistent with empirical responses of wages to both anticipated and unanticipated productivity changes. [ABSTRACT FROM AUTHOR]

We examine the start date of the Great Recession across OECD countries. The Sahm Rule identifies the start of recession in the US to the beginning of 2008 but in most other OECD countries it identifies the start after that identified by two successive falls in quarterly GDP. We establish our own rule for predicting recession using the fear of unemployment series to predict recession. We show a 10-point rise in the series compared to its previous 12 month low predicted the onset of the Great Recession in both the United States and Europe. [ABSTRACT FROM AUTHOR]

This study examines the driving forces behind the strong decline in German unemployment from 2005 onwards and the exceptionally small increase during the Great Recession. Structural vector autoregressions (VARs) with sign restrictions show that wage moderation in the aftermath of labor market reforms was the dominant factor of the unemployment decline, and that improved matching and shrinking labor supply also contributed to it. The adjustment to business cycle shocks (Great Recession), on the other hand, is to a large extent borne by the intensive margin, which can be explained by institutional aspects of the German labor market. [ABSTRACT FROM AUTHOR]

The credit-driven housing net worth channel has been identified as a determinant of the sharp drop in US employment between 2007 and 2009. We examine the impact of this channel on the labour market in the EU using panel data for 20 countries covering the period 1996 to 2017. This period saw substantial changes in both credit provision and labour market performance in the EU. The full sample results show changes in housing net wealth having a significant influence on total employment and its traded and non-traded components, with a one per cent change in housing net wealth being associated with about a 0.2 per cent change in total employment. Coefficient values are larger when changes in non-traded employment are the dependent variable, while the wealth effect is greater when negative housing net wealth shocks occur. In contrast to the US evidence, we find significant wage responses to housing net worth shocks arising in the EU. [ABSTRACT FROM AUTHOR]

This paper provides a theoretical and empirical reassessment of supermultiplier theory. First, we show that, as a result of the passive role it assigns to investment, the Sraffian supermultiplier predicts that the rate of utilization leads the investment share in a dampened cycle or equivalently that a convergent cyclical motion in the utilization-investment share plane would be counter-clockwise. Second, impulse response functions from standard recursive Vector Autoregressions for post-war US samples strongly indicate that the investment share leads the rate of utilization, or that these cycles are clockwise. These results raise questions about the key mechanism underlying supermultiplier theory. [ABSTRACT FROM AUTHOR]

This paper features an economy with frictional labour markets, Nash bargaining, cyclical opportunity cost of employment and demand-determined output. I show that the model generates big responses of unemployment to productivity movements. The key insight is that strongly countercyclical markups amplify the impact of aggregate shocks on the fundamental surplus, and as a consequence, on labour market outcomes. This answers the critique of Chodorow-Reich and Karabarbounis that the cyclicality of the opportunity cost poses a challenge to the solution of the unemployment volatility puzzle. [ABSTRACT FROM AUTHOR]

This study presents a dynamic general equilibrium model with an explicit employment period and investigates economic fluctuations to a temporary productivity shock. Numerical experiments indicate oscillatory responses of new hiring and employment to the shock which are not observed in a standard flexible price model. The explicit employment period constructs an overlapping structure of employment which results in the oscillatory response. This study also examines the effects of change in employment period to economic fluctuations and shows that the variations in new hiring are higher when the employment period is long.

Germany and the United States pursued different economic strategies to minimise the impact of the Coronavirus Crisis on the labour market. Germany focused on safeguarding existing jobs through the use of internal flexibility measures, especially short-time work (STW). The United States relied on a mix of external flexibility and income protection. On this basis, we use macroeconomic time series to examine the German strategy of securing employment through internal flexibility by contrasting it with the chosen strategy in the United States. In Germany, temporary cyclical reductions in working hours are mainly driven via STW. US unemployment rose at an unprecedented rate, but unlike in previous recessions, it was mostly driven by temporary layoffs. However, a closer look at the blind spots of the chosen strategies in both countries showed that despite the different approaches, people in weaker labour market positions were less well protected by the chosen strategies. [ABSTRACT FROM AUTHOR]

Hiring is a costly activity reflecting firms' investment in their workers. Microdata show that hiring costs involve production disruption. Thus, cyclical fluctuations in the value of output, induced by price frictions, have consequences for the optimal allocation of hiring activities. We outline a mechanism based on cyclical markup fluctuations, placing emphasis on hiring frictions interacting with price frictions. This mechanism generates strong propagation and amplification of all key macroeconomic variables in response to technology shocks and mutes the traditional transmission of monetary policy shocks. A local projection analysis of aggregate U.S. data shows that the empirical results, including the cyclicality of markups, are consistent with the model's impulse response functions. [ABSTRACT FROM AUTHOR]

We build a small open economy business cycle model with search and matching frictions to assess the impact of labor market policies on the dynamics of employment and other macroeconomic variables in emerging economies. The model features an endogenous selection mechanism by which inefficient jobs are destroyed in recessions, thus linking labor market dynamics and aggregate productivity. In a quantitative version of the model calibrated to the Mexican economy, we find that reducing labor taxes and increasing firing costs would have mitigated the fall in employment during the Great Recession of 2008–2009. However, by preventing firms from dismissing low-productive workers, higher firing costs would have impaired this selection mechanism, thus generating a larger fall in TFP and delaying the recovery. Cutting labor taxes, in contrast, have minor effects on productivity by mainly affecting hiring decisions. An extension of the model shows that lowering labor taxes provides an additional productivity boost by expanding formal hirings and reducing the informality rate. [ABSTRACT FROM AUTHOR]

This paper uses a rich weekly price database from the largest supermarket in Uruguay to analyze the relationship among prices, micro-level sales, and business cycle conditions. On average, 7% of products were on sale each month, and we show a positive and statistically significant but small relationship between sales and unemployment at the aggregate level, controlling for product and time effects. For each product category, there is a high and positive statistically significant association for these variables. Also, for some categories like food products, alcoholic drinks, beverages, and fruits and vegetables, we found a large, negative, and statistically significant relationship between the probability of being on sale and employment. The mechanism we tested is the following: As the economy worsens and unemployment rises (and/or employment falls), the supermarket uses sales to adjust prices while keeping reference prices fixed. Our results indicate that sales do not alleviate much of the price rigidity in economic recessions.We also studied sales behavior through a principal component analysis in the time domain. This analysis revealed that the first two principal components explained more than half of each sector’s variance in price dynamics. These components are significantly correlated with variations in unemployment and employment. Additionally, we found that movement in the principal components across sectors systematically Granger-cause employment changes.

Purpose – The authors introduce non-Ricardian (“hand-to-mouth”) myopic agents into an otherwise standard real-business-cycle (RBC) setup augmented with a detailed government sector. The authors investigate the quantitative importance of the presence of nonoptimizing households for cyclical fluctuations in Bulgaria. Design/methodology/approach – The authors calibrate the RBC model to Bulgarian data for the period following the introduction of the currency board arrangement (1999–2018). Findings – The authors find that the inclusion of such non-Ricardian households improves model performance along several dimensions and generally provides a better match vis-a-vis data, as compared to the standard model populated with Ricardian agents only. Originality/value – This is a novel finding in the macroeconomic studies on Bulgaria using modern quantitative methods.

We introduce “fair” wages in a general-equilibrium model where worker’s effort is unobservable and investigate whether such a mechanism can quantitatively account for the degree of real wage rigidity in the Bulgarian labor markets, as documented in Lozev, Vladova, and Paskaleva (2011) and Paskaleva (2016). In contrast to Danthine and Kurmann (2004), we internalize the effect that past wages have on the current effort level. We calibrate the model to Bulgarian data (1999-2016), and quantify the effect of technological shocks on hours and wages in the theoretical setup. Overall, the calibrated model with “fair” wages performs poorly when it comes to the relative volatilities of labor market variables. This is because aggregate labor market conditions, as proxied by the employment rate and past aggregate wages, turn out not to be quantitatively important for business cycles in Bulgaria.

Beginning in the 1990s, states have received unprecedented flexibility to determine Supplemental Nutrition Assistance Program (SNAP) eligibility and program administration. We find state SNAP policies accounted for nearly half of the 2000–2016 caseload increase. State economic conditions also play an important role in caseload changes, accounting for almost half of the 2007 through 2013 increase. Within distinct periods of our 1990–2016 data, policy and the economy make different contributions to caseload changes. Policy simulations indicate that mandating states to maintain their 2000 SNAP policies, prior to the greatest expansion in latitude, would have lowered 2000–2016 caseload growth by 38%. [ABSTRACT FROM AUTHOR]

We evaluate explanations for the absence of disinflation during the Great Recession and find popular explanations to be insufficient. We propose a new explanation for this puzzle within the context of a standard Phillips curve. If firms' inflation expectations track those of households, then the missing disinflation can be explained by the rise in their inflation expectations between 2009 and 2011. We present new econometric and survey evidence consistent with firms having similar expectations as households. The rise in household inflation expectations from 2009 to 2011 can be explained by the increase in oil prices over this time period.

This paper analyses the impact of the business cycle on labour market dynamics in EU member states and the US during the first decade of the 21st century. Using unique measures of labour market flows constructed from worker-level micro data, we examine to what extent macro shocks were transmitted to national labour markets. We apply the approach by Blanchard and Wolfers (Econ J 110(462):1–33, 2000) to analyse the role of the interaction of macroeconomic shocks and labour market institutions for worker transitions in order to explain cross-country differences in labour market reactions in a period including the Great Recession. Our results suggest a significant influence of trade unions in channelling macroeconomic shocks. Specifically, union density moderates these impacts over the business cycle, i.e. countries with stronger trade unions experience weaker reactions of the unemployment rate and of worker transitions. [ABSTRACT FROM AUTHOR]

Precautionary pricing and increasing markups in representative‐agent DSGE models with nominal rigidities are commonly used to generate negative output effects of uncertainty shocks. We assess whether this theoretical model channel is consistent with the data. Three things stand out. First, consistent with precautionary wage setting, we find that wage markups increase after uncertainty shocks. Second, the impulse responses of price markups are largely inconsistent with the standard model, both at the aggregate as well as the industry level. Finally, and in contrast to times‐series evidence, our theoretical model robustly predicts that uncertainty shocks have a quantitatively small impact on the economy. [ABSTRACT FROM AUTHOR]

In this article, we develop a simple behavioural macrodynamic model in continuous-time with the purpose of investigating the interaction of the real economy and the financial markets. Building on Westerhoff (Discret Dyn Nat Soc, 2012), we improve the specification of aggregate demand by distinguishing between consumption and investment expenditure and assuming that the latter is determined by the flexible accelerator principle. We remove the ad hoc nonlinearity in the fundamentalist behavioural rule and allow the composition of the population between chartists and fundamentalists to be endogenously determined. The resulting nonlinear dynamic systems are shown to generate various dynamic regimes, among which the coexistence of periodic attractors with interesting economic implications. Endogenous investment and stock market dynamics emerge, procyclical to each other, reflecting the interaction of induced investment with alternating waves in speculators' sentiments. We show that a strong investment accelerator might be a crucial force generating fluctuations that, on the one hand, are transmitted and amplified by chartists and, on the other hand, are contained by fundamentalists. [ABSTRACT FROM AUTHOR]

Unemployment has been routinely used as a measure of the economic cycle. In addition, regional unemployment rates are characterized by, among other factors, their relation to the national unemployment rate. In this regard, the literature on regional sensitivity to the economic cycle has analyzed how fluctuations in the national unemployment rate affect the regions. In recent years, due to the great impact of past crises, the development of new econometric techniques and the possible arrival of new crises, the debate on how sensitive regions are to the economic cycle has reopened. In Spain, this debate is necessary since unemployment rates are very high and display a great deal of heterogeneity. We analyzed regional unemployment rates in Spain between 1978 and 2018 through a recently developed dynamic spatial econometric model with common factors and found that some regions are more sensitive than others to the economic cycle. The results seem to show that in Spain, the sensitivity to the economic cycle displays a geographical pattern where the most sensitive regions are those located on the Mediterranean coast. Specifically, we find that the sensitivity to the economic cycle of unemployment is not determined by the fact that regions have high or low unemployment; it seems that geographical location plays an important role. These results can be useful for the national and regional governments when they implement countercyclical policies. [ABSTRACT FROM AUTHOR]

This paper uses a structural near-VAR to examine the effect of monetary shocks on industry-level job creation and job destruction. I find asymmetry in the job flows' responses to a positive monetary shock for disaggregated industries in the manufacturing, mining and services sectors. These findings indicate that monetary shocks trigger changes in job reallocation and point that monetary policy has important allocative effects. Yet, a test for the absence of job reallocation reveals that monetary shocks have a significant effect on job reallocation for a limited number of industries within these sectors. Moreover, this effect becomes largely insignificant after accounting for data mining. [ABSTRACT FROM AUTHOR]

In this paper, we investigate the quantitative importance of collective bargaining agreements for the observed fluctuations in Bulgarian labor markets. Following Maffezzoli (Rev Econ Dyn 4:860–892, 2001), we introduce a monopoly union into a real-business-cycle model with government sector. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999–2018), and compare and contrast it to a model without unions. We find that the sequential bargaining procedure between the monopoly union and the stand-in firm produces an important internal propagation mechanism within the theoretical setup, which allows the monopoly model to fit data better than the alternative framework with perfectly-competitive labor markets. [ABSTRACT FROM AUTHOR]

We develop a theory of endogenous and stochastic fluctuations in economic activity. Individual firms choose to randomize over firing or keeping workers who performed poorly in the past to give them an ex ante incentive to exert effort. Different firms choose to correlate the outcome of their randomization to reduce the probability with which they fire nonperforming workers. Correlated randomization leads to aggregate fluctuations. Aggregate fluctuations are endogenous—they emerge because firms choose to randomize and they choose to randomize in a correlated fashion—and they are stochastic—they are the manifestation of a randomization process. The hallmark of a theory of endogenous and stochastic fluctuations is that the stochastic process for aggregate "shocks" is an equilibrium object. [ABSTRACT FROM AUTHOR]

North African countries recorded the highest youth unemployment rate in the World during the latest years. The main causes for that situation continue to be at the forefront of the debate among economists, sociologists and policymakers. This paper contributes to the existing literature by estimating the Okun's law for four North African economies over the period 1991–2013. It examines the reaction of unemployment rate to output for different groups of the labor force as determined by age-group and gender. In addition to the basic linear specification, we present estimates of the Okun's coefficients by taking into account the potential presence of structural breaks, threshold and asymmetry. The empirical investigation highlights the presence of mixed findings regarding the significance, magnitude and stability of coefficients for the different groups of the labor force and countries. Policy implications are correspondingly drawn. [ABSTRACT FROM AUTHOR]

Antecedentes: Estudiamos c mo el nivel de empleo agregado se ajust en la eco- nom a chilena, posterior a la llamada crisis asi tica. Contrastamos distintas hi- p tesis que se han esgrimido en el debate p blico, y que no han sido probadas formalmente, sobre las razones por las cuales el nivel de empleo tard tanto tiempo en recuperar los niveles precrisis. M todos: Especi camos y estimamos un modelo de vectores autorregresivos con series de tiempo para el trimestre 1995.1-2007.4 y aplicamos el m todo de Jo- hansen para identi car vectores de cointegraci n. Resultados: Estimamos un vector de cointegraci n que representa la funci n de demanda laboral. Realizamos las siguientes pruebas de hip tesis sobre esta fun- ci n: homogeneidad de grado cero en precios, elasticidad producto de la de- manda unitaria; quiebre estructural en el intercepto de esta funci n; cambio en la elasticidad producto de la demanda laboral de largo plazo entre subperiodos y existencia de costos de ajuste. Conclusiones: Inestabilidad en la elasticidad demanda del ingreso en la funci n de demanda por trabajo en Chile posterior a la crisis asi tica, pero no en la direc- ci n sugerida por el debate previo. Adicionalmente, el factor que contribuy en forma m s decisiva a la lenta recuperaci n del empleo posterior a la crisis fue el costo de ajuste presentes en la econom a chilena.