Labour market dynamics in a heterogeneous market
AbstractThis paper develops a flow model in a dual labour market with heterogeneous workers and heterogeneous jobs that allows for upward mobility or promotion flows via the internal market and demotion or deskilling flows through the state of unemployment. Dynamic impulse-responses analyses are used to examine the effects of labour market policies that aim to generate institutional changes in the wage bargaining process, make job creation less costly or job matching more efficiently to reduce unemployment, and increase competitiveness through a rise in labour productivity. We find that the usual trade-off between wages and employment shows up clearly as a result of changes in bargaining power. Moreover, the short-run and long-run effects on unemployment of active labour market policy instruments differ considerably dependent on which segment of the labour market is influenced initially. Finally, unemployment among workers without experience (skills) goes down most strongly when productivity gains are not directed to them directly, but - instead - realized for workers in the primary segment of the labour market.
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Bibliographic InfoPaper provided by VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics in its series Serie Research Memoranda with number 0048.
Date of creation: 1999
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Web page: http://www.feweb.vu.nl
Other versions of this item:
- J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
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Serie Research Memoranda
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