Labour Market Dynamics in Australia

Wesselbaum, Dennis (2013): Labour Market Dynamics in Australia.

Abstract

This paper estimates a stylized search and matching model on data for Australia covering the period 1978-2008. Using Bayesian methods we find that the model does a fairly good job in replicating the data. Surprisingly, we find a large value for the worker’s bargaining power and low vacancy posting costs. The model generates a strong Beveridge curve and matches the standard deviations of all variables but vacancies. We identify technology and separation shocks to be the main driver of fluctuations.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bayesian Methods, Business Cycle Fluctuations, Search and Matching, Unemployment.
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C11 - Bayesian Analysis: General; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J60 - General

References

Bentolila, S. and Saint-Paul, G., 2003. Explaining Movements in the Labour Share. The B.E. Journal of Macroeconomics, 1: 9.

Blanchard, O. Galí, J., 2010. labour Markets and Monetary Policy: A New Keynesian Model with Unemployment. American Economic Journal: Macroeconomics, 2(2): 1-30.

Chindamo, P. and Uren, L., 2010. Vacancies and Unemployment in Australia. Australian Economic Review, 43(2): 136-152.

Cole, H. L. and Rogerson, R., 1999. Can the Mortensen-Pissarides Model Match the Business Cycle Facts? International Economic Review, 40(4): 933-960.

Hagedorn, M. and Manovskii, I., 2008. The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited. American Economic Review, 98(4): 1692-1706.

Karanassou, M. and Sala, H., 2010. Labour Market Dynamics in Australia: What Drives Unemployment? The Economic Record, 86(273): 185-209.

Krause, M. U. and Lubik, T. A., 2007. The (Ir)relevance of Real Wage Rigidity in the New Keynesian Model with Search Frictions”. Journal of Monetary Economics, 54: 706-727.

Lin, C.-Y. and Miyamoto, H., 2012. Estimating a Search and Matching Model of the Aggregate Labour Market in Japan. CIRJE Discussion Paper, No. F-850.

Lubik, T. A., 2011. Aggregate Labour Market Dynamics in Hong Kong. Pacific Economic Review (forthcoming).

Lubik, T. A., 2009. Estimating a Search and Matching Model of the Aggregate Labour Market. Federal Reserve Bank of Richmond Economic Quarterly, 95(2), 101-120.

Merz, M., 1995. Search in the LabourMarket and the Real Business Cycle. Journal of Monetary Economics, 36 (November): 269—300.

Mortensen, D. T. and Pissarides, C. A., 1994. Job Creation and Job Destruction in the Theory of Unemployment. Review of Economic Studies, 61(3): 397-415.

Ponomareva, N. and Sheen, J., 2010. Cyclical Flows in Australian Labour Markets. The Economic Record, 86(1): 35-48.

Sheen, J. and Wang, B., 2012. An Estimated Small open Economy Model with Labour Market Frictions. Mimeo.

Trigari, A., 2006. The Role of Search Frictions and Bargaining for Inflation Dynamics. IGIER Working paper, No. 304.