The Maltese labour market through the lens of the Beveridge curve

Abstract

This study examines labour market developments in recent periods of rapid economic growth. The shifts in the Beveridge curve, which shows the relationship between unemployment and job vacancies, are analysed to isolate transient changes in the relationship between vacancies and unemployment and the efficiency of labour market matching. The inflow and outflow risk rates are estimated for the period 1998-2022. The results show, among other things, that the matching efficiency — how effectively job seekers are paired with suitable job opportunities — improved while the job separation rate — the frequency at which workers leave their jobs — decreased over the years. The study also looks at searching externalities to show that the congestion effects caused by firms are greater than those caused by workers. The paper shows that in recent years, the negative externality caused by firms themselves has not materialised into a higher natural unemployment rate, as it has also been demonstrated that matching efficiency has increased too.