Labour market fluidity and employment outcomes in Colombia: Evidence from employer-employee linked data

Labour market flexibility has been a traditional subject of study in labour economics; recent literature has focused on the related concept of fluidity, broadly understood as the mobility of workers and jobs in the labour market. Here, we compute standard measures of fluidity for the Colombian urban labour market, finding evidence of increased fluidity, especially after 2010. Recent developments in equilibrium unemployment models predict, in general settings, a negative relationship between some fluidity measures and the equilibrium rate of unemployment. Recent literature on worker and job flows has identified benign aspects of fluidity, in that fluid labour markets are expected to have shorter average unemployment duration. We find evidence for a positive effect of fluidity on different employment and occupation indices using instrumental variable regression models that exploit variations in labour market outcomes and fluidity measures over time.