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Labour market dynamics in a heterogeneous market

Author

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  • Gorter, Cees

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

  • Larquier, Guillemette de

Abstract

This paper develops a flow model in a dual labour market with heterogeneous workers and heterogeneous jobs that allows for upward mobility or promotion flows via the internal market and demotion or deskilling flows through the state of unemployment. Dynamic impulse-responses analyses are used to examine the effects of labour market policies that aim to generate institutional changes in the wage bargaining process, make job creation less costly or job matching more efficiently to reduce unemployment, and increase competitiveness through a rise in labour productivity. We find that the usual trade-off between wages and employment shows up clearly as a result of changes in bargaining power. Moreover, the short-run and long-run effects on unemployment of active labour market policy instruments differ considerably dependent on which segment of the labour market is influenced initially. Finally, unemployment among workers without experience (skills) goes down most strongly when productivity gains are not directed to them directly, but - instead - realized for workers in the primary segment of the labour market.

Suggested Citation

  • Gorter, Cees & Larquier, Guillemette de, 1999. "Labour market dynamics in a heterogeneous market," Serie Research Memoranda 0048, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  • Handle: RePEc:vua:wpaper:1999-48
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    File URL: http://degree.ubvu.vu.nl/repec/vua/wpaper/pdf/19990048.pdf
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    References listed on IDEAS

    as
    1. Christopher A. Pissarides, 1994. "Search Unemployment with On-the-job Search," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 457-475.
    2. van Ours, J.C. & Gorter, C., 1994. "Matching unemployment and vacancies in regional labour markets; An empirical analysis for the Netherlands," Other publications TiSEM 63318c4d-4008-4f29-94eb-a, Tilburg University, School of Economics and Management.
    3. Gautier, P.A. & Butter, F.A.G. den, 1995. "Structural change and wage formation in an empirical flow model for the labour market," Serie Research Memoranda 0039, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    4. van Ours, J. C., 1991. "The efficiency of the Dutch labour market in matching unemployment and vacancies," Other publications TiSEM 4bbea82e-68fb-45e0-b32a-3, Tilburg University, School of Economics and Management.
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    More about this item

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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