Abstract:
We use detailed labor market data from Germany to study the comovement of individual earnings, separation and job-finding probabilities with fluctuations in aggregate output. In addition, we estimate impulse responses of these variables to monetary policy shocks identified from high-frequency changes in Overnight Indexed Swap rates. Our findings suggest that workers at the bottom of the income distribution are more exposed to aggregate earnings risk in general, and to monetary policy shocks specifically. This is because earnings from continued employment are more procyclical lower in the income distribution, but also because separation rates are more countercyclical there. Job-finding rates, in contrast, are more procyclical for higher incomes.