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 Nickel1 (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. * The first author is research associate at the Department of Economics of the University of Groningen and the second author is professor of economics at the Free University, Amsterdam, and is member of the Scientific Council for Government Policy at The Hague. Correspondence to second author, Free University, Department of Economics, Applied Labour Economics Reserach Team (ALERT), De Boelelaan 1105, NL-1081 HV Amsterdam, telephone: +3 1 20 4446044, facsimile: +31 20 4446005, email: [email protected];