Labor flows in Hungary and Europe

István Kónya

No 1602, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: It is common practice in the literature to compute labor flows from data on stocks. To use these flows in standard search models, it is assumed that the economically relevant movements occur between employment and unemployment. If there are significant flows between labor force participation and inactivity, ignoring the participation decision can lead to biased results. This paper shows that while with three states it is impossible to identify all the flows from publicly available data on stocks, partial identification is possible. A new method is described, which allows the computation of the transition probabilities that are most relevant from a macroeconomic perspective. The method is easy to use, and the paper describes the detailed steps for its implementation to potential users.

Keywords: Labor flows; Inactivity; Measurement; Macro data (search for similar items in EconPapers)
JEL-codes: C82 J21 J63 J64 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2016-01
New Economics Papers: this item is included in nep-tra
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