Modeling the Unemployment Rate with Simultaneous Equations

Vîntu, Denis (2025): Modeling the Unemployment Rate with Simultaneous Equations.

Abstract

This paper develops and estimates a simultaneous equations model to analyze the determinants of unemployment in [Country/Region]. By jointly modeling labor supply, labor demand, and wage-setting behavior, the study captures the complex interactions influencing the unemployment rate. Using [time series/panel/cross-sectional] data from [years], the model incorporates key labor market factors such as wage dynamics, job creation, and job separation rates. The results reveal significant simultaneous relationships between unemployment, wages, and labor market participation, highlighting the importance of considering endogeneity in labor market analysis. Policy simulations based on the estimated system provide insights into effective interventions to reduce unemployment and improve labor market efficiency.

• Item Type: MPRA Paper
• Language: English
• Keywords: Simultaneous equations model; Labor market equilibrium; Unemployment rate determination; Wage-setting equation; Price-setting equation; Beveridge curve; Job matching function; Phillips curve; Structural unemployment; Natural rate of unemployment; Labor supply and demand; Endogenous unemployment; Disequilibrium model; Employment dynamics; Wage-unemployment relationship; Aggregate labor market model; Multivariate system estimation; Identification problem; Reduced form equations; Equilibrium unemployment rate
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C30 - General; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J64 - Unemployment: Models, Duration, Incidence, and Job Search; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J65 - Unemployment Insurance ; Severance Pay ; Plant Closings; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J68 - Public Policy

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