Working Paper: NBER ID: w27525
Authors: Shigeru Fujita; Giuseppe Moscarini; Fabien Postel-Vinay
Abstract: We revisit measurement of Employer-to-Employer (EE) transitions, the main engine of labor market competition and employment reallocation, in the monthly Current Population Survey (CPS). We follow Fallick and Fleischman (2004) and exploit a key survey question introduced with the 1994 CPS redesign. We detect a sudden and sharp increase in the incidence of missing answers to this question starting in 2007, when the U.S. Census Bureau introduced a change in survey methodology, the Respondent Identification Policy (RIP). We show evidence of selection into answering the EE question by both observable and unobservable worker characteristics that correlate with EE mobility. We propose a selection model and a procedure to impute missing answers to the key survey question, thus EE transitions, after the introduction of the RIP. Our imputed aggregate EE series restores a close congruence with the business cycle, especially with the onset of the Great Recession, exhibits a much less dramatic drop in 2008-2009 and a full recovery by 2016, and eliminates the spurious appearance of declining EE dynamism in the US labor market after 2000. We also offer the first evidence of the (large and negative) impact of the COVID-19 crisis on EE reallocation.
Keywords: Employer-to-employer transitions; Labor market dynamics; Current Population Survey; Selection model; COVID-19 impact
JEL Codes: E24; E32; J62; J63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in missing answers to EE question (C83) | selection bias in responses (C83) |
| selection bias in responses (C83) | poor estimates of true EE reallocation (C51) |
| imputation procedure (C26) | restores congruence between EE transitions and business cycle (E32) |
| RIP (Y60) | increase in missing answers to EE question (C83) |
| RIP (Y60) | substantial effect on measured EE dynamism (C69) |