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The Cyclical Volatility of Equilibrium Unemployment and Vacancies: Evidence from Italy

Cardullo, Gabriele and Guerrazzi, Marco (2015): The Cyclical Volatility of Equilibrium Unemployment and Vacancies: Evidence from Italy.

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Abstract

In this paper, we explore the fluctuations of unemployment and vacancies in the Italian labour market over the last twenty years. For reasons of data availability on unfilled job openings, this period is split in two parts. The former is covered by a help-wanted time series, while the latter is analyzed relying on a harmonized vacancy rate. In both periods, in line with previous findings on the unemployment volatility puzzle, we find that the tightness indicator is more volatile than productivity. However, the gap between the respective volatilities achieves the order of magnitude observed in other countries only by using the official measure of vacancies. In addition, we show that a model with segmented labour markets and on-the-job search has the potential to provide a rationale for the pattern disclosed by the most recent data.

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