A look at the relationship between industrial dynamics and aggregate fluctuations
Starting with the pioneering work of [23], the study of the determinants and the shape of the steady-state distribution of firms’ size has long fascinated economists. While the conventional view received from the seminal work of e.g. [29], [27] and [42] holds that the firms’ size distribution is significantly right-skewed and approximately log-normal, recent empirical research has lent support to the view suggested by H. Simon and his co-author ([32]), according to whom a Pareto-Levy (or power law) distribution seems to return a better fit to the data for the whole distribution ([3]), or at least for its upper tail (Ramsden and Kiss-Haypal, 2000; [18]).
Does the search subsidy provided by unemployment insurance (UI) help workers find better jobs by or does the resulting increased time out of work lead to skill depreciation and lower reemployment wages? This paper investigates this question by exploiting strict age thresholds in the German UI system that determine workers’ maximum potential UI benefit duration. Using a regression discontinuity (RD) design we show that longer potential benefit durations lead to sharp increases in nonemployment durations while lowering post-unemployment wages. We present a new theoretical result that shows how the average eect of UI extensions on reemployment wages can be decomposed into a reservation