Česká národní banka


CNB > Economic research > Research publications > CNB Working paper series > 2018 > Labour Market Flows over the Business Cycle: The Role of the Participation Margin

Labour Market Flows over the Business Cycle: The Role of the Participation Margin

Kamil Galuščák, Jan Šolc, Pawel Strzelecki

We investigate the cyclical properties of labour market flows in the Czech Republic and Poland. We find that the role of flows from and into inactivity in explaining the cyclical properties of unemployment and employment rates is smaller than that of flows between employment and unemployment, but is not negligible. The participation rate is weakly countercyclical in both countries, driven by the countercyclical net flow from inactivity to unemployment. This could be explained by fewer employment opportunities in recessions, so that more inactive individuals go to unemployment than directly to employment. Our results are very similar for the two countries, the only noticeable difference being that flows between employment and inactivity have a bigger impact on the participation and employment rates in Poland than those in the Czech Republic.

JEL codes: E17, E24, E32, J21, J64

Keywords: Employment, labour market flows, participation, unemployment, vector autoregression

Issued: December 2018

Download: CNB WP No. 17/2018 (pdf, 906 kB)