Estimating Labor Market Slackness in Costa Rica

Jonathan Garita-Garita () and Catalina Sandoval-Alvarado ()
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Jonathan Garita-Garita: Department of Economic Research, Central Bank of Costa Rica
Catalina Sandoval-Alvarado: Department of Economic Research, Central Bank of Costa Rica

No 2302, Documentos de Trabajo from Banco Central de Costa Rica

Abstract: This article provides a set of labor market slackness indicators for Costa Rica. First, we provide an estimation of the NAIRU rate using a linear state-space model featuring a Phillips curve to capture the underlining relationship between inflation and unemployment. Next, we compute the natural rate of unemployment under the premise that the flow origins of the unemployment rate determine unemployment fluctuations and trends. Lastly, we compute an efficient unemployment rate, an unemployment level that maximizes welfare and that considers the unemployment-vacancy trade-off governed by the Beveridge curve. The three estimators coincide in showing positive employment gaps during the last decade, which translates to excess capacity at the aggregate level. Although the pandemic exacerbated the gaps, the results point that the unemployment rate. ***Resumen: Este estudio implementa diversas técnicas para inferir la tendencia subyacente de la tasa de desempleo. Primero, se presenta una estimación de la tasa de desempleo que no acelera la inflación (NAIRU) mediante un modelo lineal de estado-espacio que incorpora una Curva de Phillips. Seguidamente, se estima una tasa natural de desempleo mediante el uso de flujos de salida y entrada hacia la no ocupación, dada su importancia para explicar la evolución del desempleo. Finalmente, se presenta la estimación de una tasa de desempleo eficiente que considera la disyuntiva desempleo-vacantes resumida en una curva de Beveridge. Los diversos estimadores convergen en señalar que las brechas de desempleo han sido positivas, por lo que el mercado laboral costarricense ha mostrado, persistentemente, excesos de capacidad a nivel agregado. Aunque la pandemia exacerbó las brechas y han venido reduciéndose, los resultados apuntan a que la tasa de desempleo ha convergido a una tasa natural más alta que su nivel pre-pandemia.

Keywords: NAIRU; Natural Rate of Unemployment; Beveridge Curve; Tasa Natural de Desempleo; Curva de Beveridge (search for similar items in EconPapers)
JEL-codes: E24 E31 J63 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2023-02
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