Investigating Differences Between the Czech and Slovak Labour Market Using a Small DSGE Model with Search and Matching Frictions

Daniel Němec ()
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Daniel Němec: Masaryk University, Faculty of Economics and Administration, Department of Economics, Brno, Czech Republic

Czech Economic Review, 2013, vol. 7, issue 1, 021-041

Abstract: This contribution reveals some structural properties of the Czech and Slovak labour markets. A search and matching model incorporated into a small standard DSGE model is estimated using Bayesian techniques. Two sources of rigidities are implemented: wage bargaining mechanism and “search and matching” process matching workers and firms. The results show that the search and matching aspect provides satisfactory description of employment flows in both economies, and that the institutional characteristics do not differ too much in both economies. The model estimates provide interesting evidence that wage bargaining process is determined mainly by the power of firms. These results support the view of flexible wage environment in both economies. On the other hand, firms are confronted by increasing vacancy posting costs that limit vacancies creation. Relative low separation rate provides evidence of reduced mobility of the workers.

Keywords: Search and matching model; closed DSGE model; Bayesian estimation; labour market flexibility (search for similar items in EconPapers)
JEL-codes: C51 E24 J60 (search for similar items in EconPapers)
Date: 2013
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