The labor market in Germany is more sclerotic and volatile than in the US. We show theoretically that sclerosis and large volatilities are two sides of the same coin. Both may be driven by large hiring costs and low quit rates.

Since there is scant evidence on the role of industrial relations in wage cyclicality, this paper analyzes the effect of collective wage contracts and of works councils on real wage growth. Using linked employer-employee data for western Germany, we...

This paper shows that the German labor market is more volatile than the US labor market. Specifically, the volatility of the cyclical component of several labor market variables (e.g., the job-finding rate, labor market tightness, and job vacancies)...