The pace of structural change and labour market dynamics: simulations using an empirical flow model

A sensitivity analysis using an empirical model of labour market dynamics shows that an increase in the pace of structural chance, which leads to an outward shift of the UV-curve, may have substantial effects on employment and unemployment especially when the initial pace of structural change is low. It suggests that not only the size of the shocks but also the initial conditions can be a major cause for the labour market turbulence in economies in transition. The model simulations also display large differences in the size of the impulse responses and of recognition lags depending on the specification af the flow model and on the characteristics of the matching process.