Academia.eduAcademia.edu

Outline

Title
Abstract
Introduction
Estimation with Stock Data
Flows Estimation with Stock Data
Estimation with Flow Data
Conclusions
References
All Topics
Economics

Pitfalls in labour market flows modeling: a Reappraisal

Profile image of maurizio baussolamaurizio baussola

2017

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.

Related papers

The determinants of labour market transitions
enrico fabrizi, Mussida Chiara

Giornale degli Economisti, 2009

This paper applies multinomial logit specifications to individual-level data from the 1993-2003 labour force surveys in Italy. Following the suggestions of the main literature on the techniques to analyse data from longitudinal studies, we decide to follow a Markov chain approach to examine the labour market transitions between the states of employment, unemployment, and inactivity. We estimate labour market transition matrices at the beginning and at the end of the decade. We find evidence of increased labour market stability. This refers particularly to increased unemployment persistence and consequently to enhanced long-term unemployment incidence. Some individual characteristics exert a sizeable impact on the probability of leaving the state of unemployment. And the effectiveness of flexible labour market legislation is related to the reduction of short term unemployment. The usefulness of these regulations was also related to reduction of the incidence of the shadow economy. The long-term unemployed, instead, remain locked-in the state of unemployment. This highlights the need for proper policy interventions to increase the employment opportunities of the long-term unemployed. The results for the employment transitions show the absence of increased employment opportunities for the disadvantaged labour market categories, especially for young and females. And these findings are confirmed for the movements related to the state of inactivity. We also evaluate the labour market transitions through the overall period to operationalize the fuzzy concept of homogeneous over time. And our findings suggest the absence of such a kind of behaviour.

View PDFchevron_right
Modeling Labor Market Flows on the Basis of Sectoral Employment in Europe
Mirko Savic

Tools and Techniques for Economic Decision Analysis

By tracking the cross-sectoral distribution of employment growth, it is possible to significantly improve the ability to understand aggregate fluctuations of labor force. Adequate model can provide information which sectors have stronger impact on unemployment-to-employment transitional probability. The main goal of this research is modeling the influence of sectoral employment on outflow rate across Europe during economic crisis. Authors argue that shifts in sectoral demand have strong influence on cyclical variation in unemployment-to-employment transition. Study also uncovers highly linear relationships of outflow rate from unemployment to employment and job flows at sectoral level. Empirical data proved a strong positive correlation between dispersion of employment growth across sectors and outflow rate in Europe. Shifts in demand from some sectors to the others are responsible for significant fraction of unemployment-to-employment transition probability. Reallocation shocks accounted for about 70 to 80 percent variability of outflow rates across Europe, during the 2008-2012.

View PDFchevron_right
Transition Dynamics in European Labour Markets During Crisis and Recovery
Corrado Macchiarelli

Comparative Economic Studies, 2019

The crisis has resulted in a substantial rise in unemployment in Europe and a notable divergence in unemployment rates and labour market outcomes post-crisis. In this paper, we offer a detailed examination of the transitional dynamics underpinning changes in employment, unemployment and inactivity across the EU member states during the long period from before the crisis until the recent recovery in the recovery (2004-2016). We document substantial differences in transitional dynamics across countries and disparate shifts in these over time. We also find systematic crosscountry differences in the mediumand long-run trajectories of employment and unemployment generated by these dynamics, which can broadly be associated to differences in labour market institutions and models of labour market regulation and industrial relations (varieties of capitalism or production regimes). Applying a counterfactual analysis, we further document how altering the dynamics of labour market transitions may contribute to reducing significantly the levels of unemployment, and crosscountry disparities in these, across the EU.

View PDFchevron_right
Labour Market Transitions and Employment Regimes: Evidence on the Flexibility-Security Nexus in Transitional Labour Markets
Ruud Muffels

LSN: Transnational Labor Issues (Topic), 2002

This paper deals with the question whether the concept of transitional labour market(TLM) might be useful to formulate hypotheses about the relationship between the size and nature of labour market transitions and the performance of employment regimes. The paper starts from the idea that the TLM concept, as being developed by Gunther Schmid and others, might be connected with the notion of ‘employment regimes’ as defined by Gosta Esping-Andersen and others. Subsequently the paper aims at testing empirically whether the claims of the TLM concept with respect to labour market flexibility and work security hold in the real worlds of European labour markets. The paper comes to the conclusion that the liberal regime combines a high level of labour mobility and flexibility (although not much higher than the corporatist or social-democratic regime) with a low level of work security, and that the social-democratic regime comes out with a high level of work security but a (somewhat) lower le...

View PDFchevron_right
Labour market flows: Accounting for the public sector
Pedro Maia Gomes

Labour Economics, 2020

For the period between 2003 and 2018, we document a number of facts about worker gross flows in France, the United Kingdom, Spain and the United States, focussing on the role of the public sector. Using the French, Spanish and UK Labour Force Survey and the US Current Population Survey data, we examine the size and cyclicality of the flows and transition probabilities between private and public employment, unemployment and inactivity. We examine the stocks and flows by gender, age and education. We decompose contributions of private and public job-finding and job-separation rates to fluctuations in the unemployment rate. Publicsector employment contributes 20 percent to fluctuations in the unemployment rate in the UK, 15 percent in France and 10 percent in Spain and the US. Private-sector workers would forgo 0.5 to 2.9 percent of their wage to have the same job security as public-sector workers.

View PDFchevron_right
Institutional Determinants of Worker Flows
Sébastien Martin

OECD Social, Employment and Migration Working Papers, 2010

View PDFchevron_right
A General Methodology to Measure Labour Market Dynamics
Cristina Tealdi

SSRN Electronic Journal

We propose a general methodology to measure labour market dynamics, inspired by the search and matching framework, based on the estimate of the transition rates between labour market states. We show how to estimate instantaneous transition rates starting from discrete time observations provided in longitudinal datasets, allowing for any number of states. We illustrate the potential of such methodology using Italian labour market data. First, we decompose the unemployment rate fluctuations into inflow and outflow driven components; then, we evaluate the impact of the implementation of a labour market reform, which substantially changed the regulations of temporary contracts.

View PDFchevron_right
Employment transitions in 13 European countries. Levels, distributions and determining factors of net replacement rates
Cathal O'Donoghue

2003

Abstract: This paper utilises a multi-country microsimulation tax-benefit model for Europe, EUROMOD, to simulate the distribution of net replacement rates for 13 European countries. We look at different types of labour market transitions by comparing household incomes in the current state with simulated in-work/out-of-work counterfactuals. In particular we compare how the importance of household composition and different income sources varies across countries and for different replacement rate bands.

View PDFchevron_right
An econometric analysis of labour market transitions using discrete and tenure data
Jean-Marc Robin

Labour Economics, 1994

This paper is devoted to the estimation of models of transitions between labour market states using data collected at discrete dates as is an ordinary longitudinal survey. The innovative feature of the paper is the use of 'tenure' information in conjunction with point sample mformation on the state occupted to identify and efficiently estimate the parameters of a homogeneous Markov process. It is shown that using simultaneously tenure and state records allows full identification of the model and therefore that within-and between-status mobility can be distinguished. This dual type of information can be exploited to design a test of the Markov assumption. An empirical application on data drawn from a balanced male subsample of the 1986 to 1988 issues of the French Labour Force Survey is presented.

View PDFchevron_right
Labor Mobility During Transition: Evidence from the Czech Republic
Jan Fidrmuc

SSRN Electronic Journal, 2000

View PDFchevron_right

References (23)

  1. Mean 7.21% 0.73% 5.07% 0.50% 8.38% 1.72% 14.09% 1.00% Table 6: Estimated flow rates for the two-state labour market representation. Inflow rates Outflow rates FR IT SP UK FR IT SP UK 2010q2 1.74% 1.48% 4.59% 1.20% 34.31% 33.97% 25.00% 23.98% 2010q3 2.13% 1.76% 4.95% 1.18% 32.78% 33.25% 27.12% 26.57% 2010q4 2.68% 1.78% 5.33% 1.28% 30.95% 31.35% 24.30% 23.99% 2011q1 2.22% 1.85% 5.28% 1.20% 27.07% 34.76% 20.49% 18.57% 2011q2 1.73% 1.31% 4.55% 1.18% 33.98% 35.31% 24.91% 18.58% 2011q3 2.25% 1.49% 5.40% 1.19% 32.99% 31.93% 23.85% 18.95% 2011q4 2.73% 2.07% 6.38% 1.29% 30.53% 29.46% 21.93% 21.83% 2012q1 2.34% 2.26% 5.92% 1.31% 27.35% 25.56% 16.40% 20.33% 2012q2 1.62% 1.72% 5.08% 1.07% 29.95% 31.73% 18.74% 23.58% 2012q3 2.25% 1.55% 5.58% 1.13% 30.07% 27.74% 20.43% 23.93% 2012q4 3.05% 2.34% 6.31% 1.16% 29.27% 23.99% 17.93% 24.41% 2013q1 2.64% 2.39% 5.51% 1.41% 24.73% 19.05% 14.39% 19.51% 2013q2 1.78% 1.68% 4.35% 1.08% 30.86% 24.20% 17.75% 20.92% 2013q3 2.34% 1.67% 5.08% 1.17% 32.05% 27.81% 20.35% 25.91% 2013q4 2.71% 2.18% 5.84% 1.03% 30.36% 24.15% 19.68% 26.97% 2014q1 1.92% 2.22% 5.19% 1.06% 27.51% 18.90% 16.38% 23.26% 2014q2 1.70% 1.44% 3.96% 0.85% 30.31% 24.28% 20.49% 24.73% 2014q3 2.46% 1.83% 4.92% 0.82% 30.70% 27.21% 22.55% 23.69% 2014q4 2.78% 2.18% 5.54% 0.90% 29.01% 23.02% 23.03% 29.19% 2015q1 2.33% 2.13% 4.62% 1.03% 24.60% 19.28% 17.29% 26.50% 2015q2 1.85% 1.45% 3.88% 0.91% 32.22% 28.94% 23.22% 24.66% 2015q3 2.22% 1.61% 4.70% 0.75% 30.78% 28.28% 25.68% 29.10% 2015q4 3.03% 2.21% 5.20% 0.90% 33.84% 24.52% 24.89% 33.50% 2016q1 2.24% 2.01% 4.77% 1.00% 27.83% 23.10% 21.26% 26.33%
  2. Mean 2.28% 1.86% 5.12% 1.09% 30.17% 27.16% 21.17% 24.13% Source: Authors' calculations on EUROSTAT data. 2010q2 0.67% 0.64% 0.69% 0.87% 0.90% 0.84% 1.53% 1.47% 1.59% 0.48% 0.50% 0.46% 2010q3 0.75% 0.69% 0.81% 0.86% 0.83% 0.90% 1.62% 1.50% 1.77% 0.61% 0.65% 0.58% 2010q4 0.86% 0.78% 0.94% 1.06% 1.07% 1.05% 1.63% 1.54% 1.75% 0.51% 0.55% 0.48% 2011q1 0.67% 0.64% 0.70% 0.99% 1.02% 0.96% 1.58% 1.56% 1.62% 0.46% 0.49% 0.44% 2011q2 0.61% 0.62% 0.60% 0.90% 0.83% 0.97% 1.52% 1.52% 1.53% 0.46% 0.50% 0.44% 2011q3 0.75% 0.69% 0.80% 0.97% 0.90% 1.05% 1.74% 1.67% 1.83% 0.56% 0.59% 0.53% 2011q4 0.86% 0.86% 0.86% 1.23% 1.21% 1.26% 1.85% 1.80% 1.91% 0.47% 0.48% 0.47% 2012q1 0.73% 0.75% 0.71% 1.26% 1.29% 1.23% 1.73% 1.69% 1.78% 0.49% 0.52% 0.46% 2012q2 0.64% 0.59% 0.69% 1.17% 1.13% 1.23% 1.63% 1.57% 1.69% 0.47% 0.48% 0.45% 2012q3 0.76% 0.71% 0.82% 1.09% 1.02% 1.17% 1.80% 1.65% 1.96% 0.57% 0.57% 0.57% 2012q4 0.95% 0.95% 0.94% 1.39% 1.36% 1.44% 1.84% 1.70% 2.00% 0.46% 0.51% 0.41% 2013q1 0.81% 0.86% 0.76% 1.36% 1.32% 1.42% 1.70% 1.64% 1.77% 0.49% 0.57% 0.41% 2013q2 0.70% 0.70% 0.70% 1.33% 1.31% 1.36% 1.51% 1.38% 1.65% 0.44% 0.48% 0.40% 2013q3 0.84% 0.85% 0.82% 1.33% 1.32% 1.36% 1.72% 1.63% 1.82% 0.57% 0.57% 0.57% 2013q4 0.93% 0.93% 0.93% 1.59% 1.58% 1.63% 1.77% 1.66% 1.88% 0.42% 0.44% 0.40% 2014q1 0.84% 0.92% 0.76% 1.44% 1.53% 1.37% 1.58% 1.56% 1.61% 0.42% 0.44% 0.40% 2014q2 0.70% 0.69% 0.72% 1.23% 1.19% 1.28% 1.41% 1.33% 1.50% 0.37% 0.36% 0.38% 2014q3 0.95% 0.90% 1.00% 1.31% 1.30% 1.33% 1.61% 1.50% 1.72% 0.43% 0.44% 0.41% 2014q4 1.05% 1.07% 1.03% 1.48% 1.41% 1.57% 1.72% 1.60% 1.85% 0.37% 0.38% 0.37% 2015q1 0.81% 0.86% 0.77% 1.26% 1.31% 1.22% 1.47% 1.39% 1.55% 0.40% 0.40% 0.40% 2015q2 0.75% 0.79% 0.72% 1.30% 1.34% 1.28% 1.39% 1.26% 1.52% 0.39% 0.38% 0.41% 2015q3 0.90% 0.90% 0.91% 1.16% 1.07% 1.29% 1.50% 1.40% 1.60% 0.43% 0.44% 0.43% 2015q4 1.06% 1.10% 1.02% 1.45% 1.40% 1.52% 1.57% 1.42% 1.73% 0.36% 0.40% 0.33% 2016q1 0.85% 0.90% 0.81% 1.32% 1.32% 1.34% 1.49% 1.40% 1.58% 0.40% 0.42% 0.38% mean 0.81% 0.81% 0.81% 1.22% 1.21% 1.25% 1.62% 1.54% 1.72% 0.46% 0.48% 0.44% Source: Authors' calculations on EUROSTAT data.
  3. 54% 8.82% 10.54% Source: Authors' calculations on EUROSTAT data.
  4. Akerlof, G. A. (1981). Pitfalls in markov modeling of labor market stocks and flows. The Journal of Human Resources, 16(1), 141-151.
  5. Baussola, M. and Mussida, C. (2014). Transitions in the labour market: Dis- couragement effect and individual characteristics. Labour, 28(2), 209- 232.
  6. Blanchard, O. and Portugal, P. (2001). What hides behind an unemployment rate: comparing Portuguese and US labor markets. American Economic Review, pages 187-207.
  7. Blanchard, O. and Wolfers, J. (2000). The role of shocks and institutions in the rise of European unemployment: the aggregate evidence. The Eco- nomic Journal, 110(462), 1-33.
  8. Blanchard, O. J. and Diamond, P. (1992). The flow approach to labor markets. Technical report, National Bureau of Economic Research.
  9. Bruno, G., Marelli, P., and Signorelli, M. (2014). The Rise of NEET and Youth Unemployment in EU Regions after the Crisis. Comparative Eco- nomic Studies, 56(4), 592-615.
  10. Burda, M. and Wyplosz, C. (1994). Gross worker and job flows in Europe. European economic review, 38(6), 1287-1315.
  11. Clark, K. B., Summers, L. H., Holt, C. C., Hall, R. E., Baily, M. N., and Clark, K. B. (1979). Labor market dynamics and unemployment: a recon- sideration. Brookings Papers on Economic Activity, 1979(1), 13-72.
  12. Davis, S. J., Faberman, R. J., and Haltiwanger, J. (2006). The flow approach to labor markets: New data sources and micro-macro links. Technical report, National Bureau of Economic Research.
  13. Elsby, M. W., Hobijn, B., S ¸ahin, A., et al. (2013). Unemployment Dynamics in the OECD. The Review of Economics and Statistics, 95(2), 530-548.
  14. Elsby, M. W., Hobijn, B., and S ¸ahin, A. (2015). On the importance of the participation margin for labor market fluctuations. Journal of Monetary Economics, 72, 64-82.
  15. Fujita, S. and Ramey, G. (2006). The cyclicality of job loss and hiring. Tech- nical report, Working Papers 06-17, Federal Reserve Bank of Philadelphia.
  16. Gomes, P. (2012). Labour market flows: Facts from the United Kingdom. Labour Economics, 19(2), 165 -175.
  17. Kaitz, H. (1970). Analyzing the lenght spells on unemployment. Monthly Labor Review, 93(11), 11-20.
  18. Kiefer, N. M. (1988). Economic Duration data and Hazard Functions. Jour- nal of Economic Literature, 26(2), 646 -679.
  19. Marston, S. T., Feldstein, M., and Hymans, S. H. (1976). Employment in- stability and high unemployment rates. Brookings Papers on Economic Activity, 1976(1), 169-210.
  20. OECD (2008). Employment outlook 2008. Technical report, OECD Publish- ing, Paris.
  21. Petrongolo, B. and Pissarides, C. (2008). The ins and outs of European un- employment. American Economic Review, 97(2), 256 -262.
  22. Shimer, R. (2012). Reassessing the ins and outs of unemployment. Review of Economic Dynamics, 15(2), 127-148.
  23. Theodossiou, I. and Zangelidis, A. (2009). Should I stay or should I go? The effect of gender, education and unemployment on labour market tran- sitions. Labour Economics, 16(5), 566-577.

Related papers

Pitfalls in the modeling of labor market flows: a reappraisal
maurizio baussola, Mussida Chiara

International Review of Applied Economics, 2019

We discuss the relevance of the internationally adopted methodology for modelling labour market flows and comparing labour market flexibility. This is based on a two-state labour market model that neglects inactivity and uses aggregate stock data to derive transition rates. Traditionally, the results suggest that continental European labour markets are inflexible and unable to adjust quickly to aggregate demand or supply shocks compared with their Anglo-Saxon counterparts. This evidence has driven us to gain a better understanding of the relevance of such a modelling approach and critically discuss its main methodological hypothesis. We relax its assumptions by including inactivity and by using flow data for the period 2010-2017. We compare the results thus obtained with transition rates derived using a three-state labour market model for France, Italy, Spain and the United Kingdom. These countries represent the institutional settings of continental Europe on the one hand and Anglo-Saxon nations on the other. The implied transition rates are much higher, even in continental Europe, when inactivity is considered , thus suggesting that conclusions derived using an incomplete representation of the labour market are misleading. Inactivity therefore plays a crucial role and its inclusion provides a more exhaustive picture of labour mobility. ARTICLE HISTORY

View PDFchevron_right
Transitions in Labour Market Status in the European Union
Corrado Macchiarelli

SSRN Electronic Journal, 2013

This paper presents information on labour market mobility in 23 EU countries, using Eurostat's Labour Force Survey (LFS) data over the period 1998-2008. More specifically, it discusses alternative measures of labour market churning; including the ease with which individuals can move between employment, unemployment and inactivity over time. The results suggest that the probability of remaining in the same labour market status between two consecutive periods is high for all countries. Nonetheless, transitions from unemployment and inactivity back into the labour market are relatively weak in the euro area and central eastern European EU (CEE EU) countries compared to Denmark and, particularly, Sweden. Moreover, comparisons of transition probabilities over time suggest that-until the onset of the financial crisis-the probability of remaining in unemployment over two consecutive periods decreased in Sweden, the euro area, and, to a lesser extent, Denmark, while it increased in the average CEE EU countries. At the same time, however, successful labour market entries (from outside the labour market) increased in the average CEE EU countries, Denmark and Sweden. On the basis of an index for labour markets turnover used in the paper (Shorrocks, 1987), labour markets in Spain, Luxemburg, the Netherlands, Denmark and Sweden are the most mobile on average, with these results mainly reflecting higher mobility of people below the age of 29, highly educated and female workers. We also find that mobility of all worker groups has generally increased over time in the euro area, Denmark and Sweden. Finally, we ask whether some of the observed changes in mobility can be broadly restraint to some "macro" explanatory factors, including part time and temporary employment, unemployment and structure indicators. The results provide a mixed picture, suggesting that the sense of mobility strongly varies across countries.

View PDFchevron_right
Transitions in labour market status in EU labour markets
Corrado Macchiarelli

IZA Journal of European Labor Studies, 2014

We discuss the ease with which individuals can move between employment, unemployment and inactivity over time in the EU. Transitions from unemployment and inactivity back into employment are relatively weak in Central Eastern, Mediterranean and Continental European labour markets compared to Nordic European countries. On the basis of a mobility index used in the paper (Shorrocks, Econometrica, 46:1013-1024, 1978), labour markets in Spain, Luxemburg, the Netherlands, Denmark and Sweden are the most mobile, with these results mainly reflecting mobility of people below the age of 29, highly educated and female workers. Looking at some "macro" explanatory factors, the results suggest a mixed picture.

View PDFchevron_right
LABOUR MARKET TRANSITIONS IN EUROPE
Ferry Koster

2012

Abstract This report serves the following purposes. First it provides an overview of the major labour market transitions across 13 European countries using monthly data of individual transitions over a period of 8 years (1994-2001). Secondly, it investigates how these labour market transitions relate to people's life-course by identifying different age cohorts.

View PDFchevron_right
Labor Market Flows in Transition
Irina Denisova

2007

Based on the Life in Transition Survey (LiTS) conducted by the EBRD and the World Bank, we examine labor market transformation during transition from planned to market economies in 29 countries in postcommunist Europe and Central Asia. The results indicate that the transition shock of the early 90s had a substantial effect on employment and labor market trajectories at the microeconomic level. The main results can be summarized as follows. Labor market participation decreases sharply in most countries and recovers only by 2001 onwards. The self-employment sector grows gradually as transition progresses. There is a large substitution of state for private sector employment throughout the transition. State sector employment is hit much stronger by the transition shock and private sector employment is the preferred option when people return to work for wages after a period of nonemployment or enter work force after completing their education. High-skill employment is more shock-resistant than low-or medium-skill employment; there is no evidence of an upward or downward occupational mobility. With regard to both timing and intensity of the transition shock, labor markets have been affected differentially in different regions. Even though cross-country heterogeneity of the labor market transitions is very large, some typology is observed.

View PDFchevron_right

Related topics

  • Economics
    • 580 California St., Suite 400
    San Francisco, CA, 94104
    © 2025 Academia. All rights reserved