Bank of Lithuania
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No 124

Life-cycle Worker Flows and Cross-country Differences in Aggregate Employment

  • Abstract

    We document how worker flows between employment, unemployment, and out of the labor force, vary by age and gender for a large panel of European countries. We develop and calibrate an extended Diamond-Mortensen-Pissarides model that captures all the salient features of these data. The model assigns a major role to the production technology in driving differences in aggregate employment, while, in contrast to Standard analyses, labor-market policies play only a secondary role. Search intensity and a laborforce participation decision are key for propagating the effects of technology across age and gender groups, and for explaining the variation in aggregate employment.

    Keywords: Employment, Unemployment, Labor Force Participation, Life cycle, Worker Flows, Labor Market Institutions

    JEL classification: E02, E24, J21, J64, J82