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Abstract
The occupational skill structure depends on the business cycle if employers respond to shortages of applicants during upturns by lowering their hiring standards. The notion and relevance of hiring standards adjustment was advanced by Reder and investigated formally in a search-theoretic framework by Mortensen. Devereux implements empirical tests for these theories and finds affirmative evidence for the U.S. labour market. We replicate his analysis using German employment register data. Regarding the occupational skill composition we obtain somewhat lower but qualitatively similar responses to the business cycle despite of well known institutional differences between the U.S. and German labour market. The responsiveness of occupational composition wages to the business cycle is considerably lower in Germany.
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The referees and myself have read the paper. As you can see from the reports, they are very critical and see many issues of the paper which are either difficult to follow or misleading. I agree with the issues the referees raised and would give you the opportunity ...[more]
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to prepare a major (!) revision of the paper covering all issues the referees are bringing up.
I noticed that the issue about having an aggregate or regional unemployment rate is important for the interpretation of the whole analysis and would like you to discuss this issue with some detail in the paper as well.
I think this is a nice paper that tests innovative hypotheses on the labour market and may explain some of the actual reasons behind employment (and unemployment) according to skill and wage.