Labour Market Analysis with VAR Models

Melbourne Institute Working Paper No. 19/00

Date: September 2000


Peter Summers


This paper provides an overview of how labour market analysis can be conducted in the context of VAR-based models. The examples presented here show that these methods are quite flexible, and capable of addressing a wide variety of theoretical and policy-related issues. Specifically, the various techniques are illustrated in models which: examine the dynamics of gross job flows; assess the relationship between real wages and unemployment; quantify the contribution of sectoral shocks to the number of people unemployed by duration of unemployment; examine the relative contributions of discouraged worker effects, insider effects, etc. on the persistence of unemployment; and analyse the effects of labour market shocks in the OECD countries.

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