IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

Oil Price Shocks and Labor Market Fluctuations

Abstract:
We examine the impact of real oil price shocks on labor market flows in the U.S. We first use smooth transition regression (STAR) models to investigate to what extent oil prices can be considered as a driving force of labor market fluctuations. Then we develop and calibrate a modified version of Pissarides' (2000) model with energy costs, which we simulate in response to shocks mimicking the behavior of the actual oil price shocks. We find that (i) these shocks are an important driving force of job market flows; (ii) the job finding probability is the main transmission mechanism of such shocks; and (iii) they bring a new amplification mechanism for the volatility of the labor market, and should thus be seen as complementary of labor productivity shocks. Overall we conclude that shocks in oil prices cannot be neglected in explaining cyclical labor adjustments in the U.S.

Purchase ( $25 )

Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Petroleum – Policy and Regulation; Energy and the Economy – Energy as a Productive Input; Energy and the Economy –Economic Growth and Energy Demand; Energy and the Economy – Resource Endowments and Economic Performance; Energy and the Economy – Energy Shocks and Business Cycles

JEL Codes: Q41: Energy: Demand and Supply; Prices, Q43: Energy and the Macroeconomy, C53: Forecasting Models; Simulation Methods, Q31: Nonrenewable Resources and Conservation: Demand and Supply; Prices, C51: Model Construction and Estimation

Keywords: Oil Prices, Unemployment, Labor market vacancies, Business Fluctuations

DOI: 10.5547/ISSN0195-6574-EJ-Vol32-No3-4

Published in Volume 32, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

© 2024 International Association for Energy Economics | Privacy Policy | Return Policy