Anders Frederiksen (Aarhus School of Business, Centre for Corporate Performance and IZA)

Explaining Individual Job Separations: An Econometric Analysis Applying Employer-Employee Data

In this paper individual job separations are analysed using employer-employee data. Firstly, it is shown that characteristics reflecting both the demand and supply side of the economy are important predictors for job separations and that failure to account for both sides of the economy simultaneously produces wrong inference. Secondly, labour market destinations subsequent to a job separation are introduced. This additional information reveals that job separations are common and that most individuals have a significant probability of changing job or becoming unemployed whereas the probability of leaving the labour force is very low for most people. Job separations are found to be stable with respect to the unemployment rate but job-to-job and job-to-non-employment transitions vary substantially. In particular the number of job-to-job transitions does increase when economic conditions improve. Combining this with the fact that transitions into unemployment and withdrawals from the labour market are counter cyclical, we conclude that the probability of being employed conditional on employment in the previous period is pro cyclical.

Keywords: Employer-employee data; Job separations; Labour reallocation; Random effects models.

JEL Codes: C23, E24, J63

Session: 2d   Room 2003   Category: Job separation

Paper