A Markov Chain Analysis of Labour Market Dynamics

Sammanfattning

This thesis analyses labour market dynamics using a Markov chain framework applied to Eurostat transition data. Instead of focusing on static unemployment rates, the study models flows between employment (E), unemployment (U) and inactivity (I). The results show clear structural differences between Sweden and Romania, particularly in job-finding rates and persistence. From an industrial economics perspective, the findings link transition structures to overall system efficiency. In addition, macroeconomic analyses suggest that Sweden’s long-run equilibrium unemployment is around 7 percent, providing a useful reference point for interpreting the results. The study demonstrates how dynamic modelling provides deeper insights into labour market performance and rigidity.