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Pitfall in labour market flows modeling: a Reappraisal

Author

Listed:
  • Maurizio Baussola

    (DISCE, Università Cattolica)

  • Camilla Ferretti

    (DISCE, Università Cattolica)

  • Chiara Mussida

    (DISCE, Università Cattolica)

Abstract

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.

Suggested Citation

  • Maurizio Baussola & Camilla Ferretti & Chiara Mussida, 2017. "Pitfall in labour market flows modeling: a Reappraisal," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali dises1722, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    • Handle: RePEc:ctc:serie2:dises1722
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    File URL: http://dipartimenti.unicatt.it/dises-dises_wp_17_122.pdf
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    References listed on IDEAS

    as
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    2. Elsby, Michael W.L. & Hobijn, Bart & Şahin, Ayşegül, 2015. "On the importance of the participation margin for labor market fluctuations," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 64-82.
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    More about this item

    Keywords

    labour market flows; labour market transition matrices; inactivity; comparison across countries;
    All these keywords.

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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