Measuring Inefficiency of the Czech Labour Market

Abstract

This paper aims to quantify the performance of the Czech regional labour markets and to reveal the most influential economic factors standing behind its dynamics in the last fifteen years. Investigated labour markets are described using matching function approach. The successful matches are treated as an output of production process, where the unemployed are paired with vacancies. Efficiency of this matching process plays an important role in determining unemployment outflows. Using stochastic frontier model approach, dynamics of quantified efficiency terms is revealed and differences among regions are evaluated. The model specification includes a fixed effect term, where individual effect terms and inefficiency terms are estimated jointly. The stochastic frontier is estimated using monthly and quarterly regional panel data of 77 districts for the period 1999-2014. Matching efficiency of the Czech regional labour markets is negatively influenced people who have been unemployed for a long time and by the unemployed aged over 50 years. Although all districts were able to operate at their stochastic frontiers of matching, an upward trend in the inefficiency has been found within the investigated period. These tendencies are accompanied by rising disparities among the regions. Low levels of estimated matching inefficiency do not necessary mean the low unemployment in the corresponding districts.

A Study on the Matching Efficiency of Malaysia's Labor Market during the Covid-19 Pandemic using the DEA-Malmquist Productivity Index

“…The authors find that the returns to scale are close to constant in the frontier estimation. This method was later followed by Němec (2015) and Hynninen et al (2009), who respectively attempted to measure the efficiency of the Czech and Finnish labor markets. Meanwhile, Sheldon (2003) measures the efficiency of public employment services in Switzerland by employing the non-parametric method DEA.…”

The efficiency of public employment services: a matching frontiers approach

“…With the same data, Hynninen (2009) employs a true fixed-effects model to separate cross-sectional heterogeneity from inefficiency, and the inefficiency terms are modelled also following the Battesse and Coelli (1995) model. Finally, Němec (2015) analyses Czech regional labour markets for the period 1999-2014 using a fixed effect panel stochastic model[2].…”