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Labour participation and labour market dynamics in an empirical flow model with heterogeneous unemployment

  • Butter, F.A.G. den

    (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)

A flow model of the Dutch labour market is used to calculate the efects of autonomous labour demand and supply shocks on employment and unemployment. The model is centered around a matching function which allows for heterogeneous unemployment by taking explicitly account of POWS through various duration classes of unemployment. The model describes the interaction between flows of jobs and flows of persons, and is based on times series data with respect to these flows at the macro level. A positive labour supply shock, representing a policy which aims at enhancing labour participation, appears to lead to more employment indeed, but the eflect is rather small in case of the present situation in The Netherlands with much more unemployment than vacancies. A sensitivity analysis shows to what extent the effects of labour supply and demand shocks depend upon the pace of labour market dynamics and on the relative position of the reduced form W-curve implied by the model.

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Paper provided by VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics in its series Serie Research Memoranda with number 0022.

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Date of creation: 1995
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Handle: RePEc:vua:wpaper:1995-22
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  1. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 19 pages.
  2. Burdett, Kenneth & Coles, Melvyn G & van Ours, Jan C, 1994. "Temporal Aggregation Bias in Stock-Flow Models," CEPR Discussion Papers 967, C.E.P.R. Discussion Papers.
  3. Broersma, L. & Butter, F.A.G. den, 1994. "A consistent set of time series data on labour market flows for the Netherlands," Serie Research Memoranda 0043, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  4. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
  5. Berg, G.J. & Ours, J.C., 1993. "Unemployment dynamics and duration dependence in France, the Netherlands and the UK," Serie Research Memoranda 0038, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  6. Stephen T. Marston, 1976. "Employment Instability and High Unemployment Rates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(1), pages 169-210.
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