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

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  • 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)

Abstract

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.

Suggested Citation

  • Butter, F.A.G. den, 1995. "Labour participation and labour market dynamics in an empirical flow model with heterogeneous unemployment," Serie Research Memoranda 0022, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    • Handle: RePEc:vua:wpaper:1995-22
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    References listed on IDEAS

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    More about this item

    Keywords

    Unemployment; Labour supply; Labour demand; Structural change; Simulation model;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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