An Estimated Search and Matching Model of the Croatian Labor Market: Post-crisis Analysis

Abstract

The paper specifies a simple search and matching model of the labor market and studies how well the model can describe aggregate Croatian labor market dynamics. The model developed is a discrete-time search and matching model with convex vacancy posting costs and two types of shocks: productivity and separation shocks. The model is estimated on unemployment and vacancy data during the period from 2012 to 2020 by using Bayesian methods. The model fits the data well and the estimation shows that productivity shocks are the main driving force of the fluctuations in the labor market, especially for the case of vacancies and output, while the separation shock process accounts for a large percentage of unemployment fluctuations.