The Natural Rate of Unemployment and the Unemployment Gender Gap

Recent labour market developments include an increase in labour market mismatches, in that high unemployment rates coexist with significant levels of vacancies. This pattern is particularly evident in the US economy, but is also significant within the European Union; it implies that the natural rate of unemployment may rise significantly, thus suggesting that even if policies aimed at reducing it are implemented, the unemployment rate may remain steady if not increase. An important factor possibly influencing such an increase is related to the gender differential in employment opportunities. This is particularly relevant wherever such a differential represents a structural characteristic of the labour market, as in the case of Italy. The present work focuses on this issue and presents a methodology to decompose the natural rate of unemployment by gender, thus defining it in terms of equilibrium labour market flows between the aggregate states of the labour market (Employment, Unemployment, Non Labour Force). In addition, we propose estimates of the determinants of the unemployment gender gap, in order to pinpoint the relative roles of individual characteristics and structural factors in determining this difference.