Labor Reallocation, Employment, and Earnings: Vector Autoregression Evidence

Abstract

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.

Impact assessment of job reallocation on unemployment in Morocco: An ARDL approach

“…Furthermore, the study reveals a strong relationship between labor flows and short-term income inequality. Using the same framework, Hyatt and McElroy (2019) analyzed the relationship between labor reallocation, employment and income in the USA between 1993 and 2013. Using an autoregressive vector framework, the authors found that a 1% increase in labor reallocation creates between 100,000 and 560,000 jobs, reducing the unemployment rate by 0.05-0.25 percentage points.…”