A Stock-Flow Accounting Model of the Labor Market: An Application to Israel

March 16, 2015

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The paper utilizes a theoretical stock-flow accounting model of the labor market, similar to Blanchard and Diamond (1989). Identifying restrictions are derived from the theoretical model and are imposed on a SVAR system. The estimation allows for decomposing fluctuations to their cyclical and structural components. The model is applied to the Israeli economy. The estimates suggest that non-cyclical factors account for at least half of the decline of the unemployment rate during the period between 2004-Q1, when unemployment peaked at 10.9 percent, and 2011-Q4, when it marked a trough at 5.4 percent; suggesting a shift inward of the Beveridge curve.

Subject: Labor, Labor force, Labor markets, Labor supply, Unemployment, Unemployment rate

Keywords: beneits result, Beveridge curve, Global, job destruction parameter, Labor force, Labor markets, Labor supply, result unemployment, Structural unemployment, SVAR with sign restrictions, time series, Unemployment, Unemployment rate, unemployment rise, unemployment variation, vacancies in response, WP

Pages:
54
Volume:
2015
DOI:
https://doi.org/10.5089/9781484360569.001
Issue:
058
Series:
Working Paper No. 2015/058
Stock No:
WPIEA2015058
ISBN:
9781484360569
ISSN:
1018-5941

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