Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98993
Authors: 
Dixon, Robert
Lim, Guay C.
van Ours, Jan C.
Year of Publication: 
2014
Series/Report no.: 
IZA Discussion Papers 8221
Abstract: 
This paper presents an analysis of labour market dynamics, in particular of flows in the labour market and how they interact and affect the evolution of unemployment rates and participation rates, the two main indicators of labour market performance. Our analysis has two special features. First, apart from the two labour market states - employment and unemployment - we consider a third state - out of the labour force. Second, we study net rather than gross flows, where net refers to the balance of flows between any two labour market states. Distinguishing a third state is important because the labour market flows to and from that state are quantitatively important. Focussing on net flows simplifies the complexity of interactions between the flows and allows us to perform a dynamic analysis in a structural vector-autoregression framework. We find that a shock to the net flow from unemployment to employment drive the unemployment rate and the participation rate in opposite directions while a shock to the net flow from not in the labour force to unemployment drives the rates in the same direction.
Subjects: 
net labour market flows
unemployment rate
participation rate
JEL: 
E17
E24
J21
J64
Document Type: 
Working Paper

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