The importance of education for the reallocation of labor: Evidence from Swedish linked employer–employee data 1986–2002

Using Swedish employer–employee data we study job and worker flows for different educational groups, as well as the cyclicality of such flows. Due to the long period studied, from 1986 to 2002, and the widely fluctuating business cycle during this period, we have a unique opportunity to analyze the cyclical pattern of job and worker flows. We especially look at the big downturn in the Swedish economy in the beginning of the 1990s. When workers are treated as homogenous, we find job reallocation to be countercyclical. However, when we estimate correlations for different educational groups, we find job reallocation to be countercyclical for the lowest educated, and acyclical for higher educated workers. Contrary to job flows, we find worker flows to be acyclical, with a strong procyclical pattern in hiring rates, and an acyclical pattern in separation rates. When decomposing worker flows into educational groups, the acyclical pattern is prevalent for all groups, except for the highest educated. For the highest educated, worker reallocation is strongly pro-cyclical due to both more hirings and separations during up-turns.