Labour flows as determinants of the wage-price spiral : an empirical analysis for the Netherlands

This study presents an empirical analysis of the influence of labour market flows on wage and price formation. A system of wage, price and employment equations in the vein of Nickell (1987) is estimated including labour flows as explanatory variables. A combination of the flow of layoffs (flow from employment to unemployment) and the flow of filled vacancies (successful matches) appears to be an adequate alternative to the unemployment rate as indicator of labour market tightness in the wage equation for The Netherlands.