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© 2022 International Monetary Fund & Reserve Bank of New Zealand
WP/22/172
IMF Working Paper
Asia and Pacific Department
What Matters for Job Finding and Separation in the Long Run? Evidence from Labor Market Dynamics in New Zealand
Prepared by Guanyu Zheng, Gulnara Nolan, Christopher Ball, Siddharth Kothari and Yosuke Kido*
Authorized for distribution by Harald Finger
October 2022
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed herein are those of the authors and do not necessarily represent the views of the Reserve Bank of Australia, Reserve Bank of New Zealand, Ministry of Business, Innovation and Employment, the International Monetary Fund, the IMF’s Executive Board, or IMF management.
ABSTRACT: We use the novel anonymized Household Labour Force Survey (HLFS) microdata to analyze job finding rates and job separation rates in New Zealand. We find that individual characteristics, including age, gender, ethnicity and education have a significant impact on job finding and separation rates, even after controlling for other factors. We use a decomposition approach to analyze how the effects of individual characteristics on job finding and separation rates contribute to heterogeneity in employment outcomes. Overall, we find that higher separation rates of young workers play a disproportionate role in explaining heterogeneity of employment outcomes across age groups, while differences in finding rates are somewhat more important in explaining differences by education level. Both finding and separation rate differences are important in explaining differences across ethnicities. We also find some heterogeneous response of worker groups to business cycle after controlling for other factors. The results underscore the importance of well-targeted labor market support policies.
| JEL Classification Numbers: | E24, J62, J63 |
| Keywords: | Labor market dynamics; Gross worker flows; Unemployment variability |
| Author’s E-Mail Address: | guanyu.zheng@mbie.govt.nz; nolang@rba.gov.au; christopher.ball@rbnz.govt.nz; SKothari@imf.org; YKido@imf.org |
| JEL Classification Numbers: | E24, J62, J63 |
| Keywords: | Labor market dynamics; Gross worker flows; Unemployment variability |
| Author’s E-Mail Address: | guanyu.zheng@mbie.govt.nz; nolang@rba.gov.au; christopher.ball@rbnz.govt.nz; SKothari@imf.org; YKido@imf.org |
Title Page
WORKING PAPERS
What Matters for Job Findings and Separation in the Long Run?
Evidence from Labor Market Dynamics in New Zealand
Prepared by Guanyu Zheng, Gulnara Nolan, Christopher Ball, Siddharth Kothari and Yosuke Kido1
Contents
1. Introduction
2. Labor Market Indicators in New Zealand
2.A. Dispersion across groups
2.B. The Household Labour Force Survey micro-level data
3. Labor Market Dispersion: Heterogeneity Across Worker Groups
3.A. Methodology: Micro-level Regressions
3.B. Results of Micro-level Regressions
3.C. Methodology: Counterfactual Analysis for Steady State Unemployment Rates
3.D. Results of Counterfactual Analysis
4. Heterogenous Response to Business Cycles
5. Conclusion
Appendix 1. Robustness Checks
References
TABLES
Table 1. Labor Market Indicators of Worker Groups
Table 2. Job-finding regressions: Probit Regression
Table 3. Job-exit Regressions: Probit Regression
Table 4. Decomposition of Steady State Non-employment Rates
Table 5. Decomposition of Steady State Unemployment Rates
Table 6. Job-finding Regressions with Business Cycle Interaction Terms
Table 7. Job-exit Regressions with Business Cycle Interaction Terms
Zheng: Ministry of Business, Innovation and Employment; Nolan: Reserve Bank of Australia; Ball: Reserve Bank of New Zealand; Kido and Kothari: IMF.
We are grateful to Harald Finger and Ippei Shibata for their helpful comments. We thank Statistics New Zealand for their help with labor market data. The views expressed herein are those of the authors and do not necessarily represent the views of the Reserve Bank of Australia, Reserve Bank of New Zealand, Ministry of Business, Innovation and Employment, the International Monetary Fund, the IMF’s Executive Board, or IMF management.