A Simulation Model of Employment, Unemployment and Labor Turnover

An econometric model of the labor market for Swedish industrial workers has been developed and estimated. The model consists of ten stochastic equations. It focuses on the flows between the stocks of employed, unemployed and job vacancies and is driven as a self-contained system by exogenous output demand. Information on important employment policies during the 1970s are incorporated and a simulation experiment provides a quantitative assessment of the effects. The simulation reveals that the policies have had important effects on employment, unemployment, labor turnover and labor productivity. A “passive” policy would have approximately doubled the level of unemployment in 1977 and 1978.