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French Unemployment Dynamics: a “Three-State” Approach

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  • Idriss Fontaine

Abstract

In this paper, I provide a new assessment of labor market flows in France over the period 2003-2012. By using the French Labor Force Survey and the ILO?s standards, I construct gross worker flows and transition rates between the three main labor market states: employment, unemployment and inactivity. The cyclical properties of the series suggest that flows jointly involving employment and unemployment are the most sensitive to economic conditions. Flows between participation and non-participation exhibit less cyclical patterns over the business cycle. I then decompose unemployment rate variations by applying a steady state and a non-steady state decomposition. With a three state view of the labor market, I find that the job finding rate is the first driver of unemployment fluctuations in France, while the job separation rate is the second. Furthermore, the role of inactivity in shaping unemployment is not negligible since it explains one quarter of its variations. This empirical finding justifies a complete analysis of the labor market with three labor market states. Finally, I propose an analysis based on three partitions of the French population: gender, age and education level. This indicates that the sources of unemployment are different among these sub-groups.

Suggested Citation

  • Idriss Fontaine, 2016. "French Unemployment Dynamics: a “Three-State” Approach," Revue d'économie politique, Dalloz, vol. 126(5), pages 835-869.
    • Handle: RePEc:cai:repdal:redp_265_0835
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    Citations

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    Cited by:

    1. Fontaine, Idriss & Gálvez-Iniesta, Ismael & Gomes, Pedro & Vila-Martin, Diego, 2020. "Labour market flows: Accounting for the public sector," Labour Economics, Elsevier, vol. 62(C).
    2. Normann Rion, 2020. "Fluctuations in a Dual Labor Market," PSE Working Papers halshs-02570540, HAL.
    3. Normann Rion, 2019. "Waiting for the Prince Charming: Fixed-Term Contracts as Stopgaps," Working Papers halshs-02331887, HAL.
    4. Moreno Galbis, Eva & Wolff, Francois-Charles & Herault, Arnaud, 2020. "How helpful are social networks in finding a job along the economic cycle? Evidence from immigrants in France," Economic Modelling, Elsevier, vol. 91(C), pages 12-32.
    5. Arnaud Herault & Eva Moreno Galbis & Francois-Charles Wolff, 2018. "Network Matching Efficiency along the Economic Cycle: Direct and Indirect Ties," AMSE Working Papers 1832, Aix-Marseille School of Economics, France.

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