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Structural change and wage formation in an empirical flow model for the labour market

Author

Listed:
  • Gautier, P.A.

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

  • Butter, F.A.G. den

Abstract

This paper analyzes the impact of supply shocks, demand shocks and policy shocks on labour market dynamics, using a consistent macroeconomic flow model of the Dutch labour market. The long run properties of the model mimic those of the theoretical equilibrium search models, with endogenous vacancy supply, wage formation and matching of unemployed and vacancies. The model also describes the propagation of shocks through different duration classes of unemployment and allows for duration dependent exit probabilities from unemployment. Simulation experiments and a sensitivity analysis show that a shock may bring the labour market out of its long run dynamic equilibrium for a considerable period and that the length of that period depends much on the initial pace of structural change.

Suggested Citation

  • 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.
    • Handle: RePEc:vua:wpaper:1995-39
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    File URL: http://degree.ubvu.vu.nl/repec/vua/wpaper/pdf/19950039.pdf
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    Citations

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    Cited by:

    1. 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.
    2. den Butter, Frank A. G. & Gorter, Cees, 1999. "Modelling labour market dynamics with on-the-job search," Economic Modelling, Elsevier, vol. 16(4), pages 545-567, December.
    3. F.A.G. den Butter & M. van Dijk, 1997. "The Pace of Structural Change, Cyclical Shocks and Unemployment Dynamics," Tinbergen Institute Discussion Papers 97-053/3, Tinbergen Institute.

    More about this item

    Keywords

    Equilibrium wage formation; vacancy supply; Matching process; Labour market dynamics; Structural change; Impulse-response effects;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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