The Macroeconomic Causes and Consequences of Changing Labor Mobility and Unemployment

Abstract

The causes and consequences of worker mobility and its broader implications for labor market efficiency and welfare are complex and have been widely discussed in both the public debate and the academic literature. This thesis contributes to that discussion in three ways: The first chapter explores the drivers behind the secular decline in worker mobility in the US since the 1980s and puts forward a new explanation that has been overlooked in the literature so far. I argue that the specialization of firms and the outsourcing of non-core activities was a key determinant of declining reallocation rates and had more benign effects in terms of efficiency than conventional explanations suggest. Turning from secular trends to labor market policies, the second and third chapter investigate the role of unemployment insurance policies (UI) in shaping labor markets through their effects on job finding and job separation rates. While the second chapter focuses on the macroeconomic effects of structural reforms to the German UI system in the mid-2000s, the third chapter explores the merits and welfare costs of a common European UI scheme. In both chapters, accounting for the differential impact of UI policies on job finding and separation rates is crucial for assessing the impact of UI policies on broader economic outcomes such as the unemployment rate and aggregate welfare.