Labor Market Transitions and Unemployment Dynamics: An Empirical Assessment based on the Austrian Labor Force Survey

The evolution of unemployment is directly linked to worker flows between unemployment, employment and inactivity. This reallocation process of labor typically differs not only between countries but also over different labor market regimes and demographic worker groups. Being aware of this heterogeneity enables to take appropriate policy measures to tackle the problem of rising unemployment during recessional times. For the Austrian labor market, we examine how movements in worker flows have shaped changes in unemployment over the last decade. In this context we are the first to employ the rotational panel structure of the Austrian Labor Force Survey (LFS), which allows the identification of worker flows for a large number of different subgroups. In this seminal study we deal with two main tasks. Firstly, we address several data-related issues that arise when cross-sections are matched to construct a balanced panel dataset. Thereby we focus on the arising bias from non-random panel attrition and present an intuitive adjustment procedure. In the second part we provide worker flow estimates based on the corrected data set and use them to decompose the unemployment variation into contributions from job-losses, job-findings and flows via non-participation for various subgroups.