This paper focuses on labour market dynamics in the EU 15 using Markov Chains for proportions of aggregate data for the first time in this literature. We apply a Bayesian approach, which employs a Monte Carlo Integration procedure that uncovers the entire empirical posterior distribution of transition probabilities from full employment to part employment, temporary employment and unemployment and vice a versa. Thus, statistical inferences are readily available. Our results show that there are substantial variations in the transition probabilities across countries, implying that the convergence of the EU-15 labour markets is far from completed. However, some common patterns are observed as countries with flexible labour markets exhibit similar transition probabilities between different states of the labour market.
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Paper provided by Department of Economics, University of Macedonia in its series Discussion Paper Series with number
2009_07.
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