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Pitfall in labour market flows modeling: a Reappraisal

Listed author(s):
  • Maurizio Baussola


    (DISCE, Università Cattolica)

  • Camilla Ferretti


    (DISCE, Università Cattolica)

  • Chiara Mussida


    (DISCE, Università Cattolica)

We discuss the relevance of the methodology adopted internationally to compare labor market flexibility, which is based on a two-state labor market model and uses stock data to derive transition rates. This model neglects inactivity, and thus it may crucially affect the results. Therefore, we compare these results with transition rates derived by using a three-state labor market model for France, Italy, Spain and the UK. These countries represent, respectively, the continental Europe and the Anglo-Saxon institutional settings. The implied transition rates are much higher even in continental Europe when inactivity is explicitly considered, thus suggesting that conclusions derived using an incomplete representation of the labor market are flawed.

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Paper provided by Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) in its series DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali with number dises1722.

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Length: 34 pages
Date of creation: Feb 2017
Handle: RePEc:ctc:serie2:dises1722
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