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The Unemployment‐Vacancy Relationship in Australia

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  • Jerome Fahrer
  • Andrew Pease

Abstract

One of the most important features of the Australian economy in the past two decades has been the structural deterioration of labour market performance, reflected in both an increase in the average rate of unemployment and an outward shift in the Beveridge Curve, which depicts the relationship between unemployment and vacancies. This article attempts to uncover some of the causes for this structural deterioration, in terms of the factors affecting the UVrelationship. We find that the Beveridge Curve shifted out around 1974, consistent with an increase in the equilibrium rate of unemployment which is generally agreed to have occurred around that time. Using gross labour market flow data, we also investigate the determinants of the equilibrium Beveridge Curve in the 1980s. We find that the Beveridge Curve shifted further outwards in the 1980s. The most important determinant of this shift was the decline in the search effectiveness of the unemployed, reflected in the increasing incidence of long‐term unemployment. Partially offsetting this influence during this time were the declining labour force participation of men, and the very large increases in female employment.

Suggested Citation

  • Jerome Fahrer & Andrew Pease, 1993. "The Unemployment‐Vacancy Relationship in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 26(4), pages 43-57, October.
    • Handle: RePEc:bla:ausecr:v:26:y:1993:i:4:p:43-57
    DOI: 10.1111/j.1467-8462.1993.tb00810.x
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    1. Olivier Jean Blanchard, 1991. "Two Tools for Analysing Unemployment," International Economic Association Series, in: Marc Nerlove (ed.), Issues in Contemporary Economics, chapter 5, pages 102-127, Palgrave Macmillan.
    2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, Decembrie.
    3. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    4. Jerome Fahrer & Alexandra Heath, 1992. "The Evolution of Employment and Unemployment in Australia," RBA Research Discussion Papers rdp9215, Reserve Bank of Australia.
    5. Jerome Fahrer & Andrew Pease, 1993. "The Unemployment/Vacancy Relationship in Australia," RBA Research Discussion Papers rdp9305, Reserve Bank of Australia.
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    Cited by:

    1. A.J. Hagger & N. Groenewold, 2000. "Time to Ditch the Natural rate?," Economics Discussion / Working Papers 00-09, The University of Western Australia, Department of Economics.
    2. Philip M. Bodman, 1999. "Labour Market Inefficiency and Frictional Unemployment in Australia and its States: A Stochastic Frontier Approach," The Economic Record, The Economic Society of Australia, vol. 75(2), pages 138-148, June.
    3. Anthony De Francesco, 1999. "The relationship between unemployment and vacancies in Australia," Applied Economics, Taylor & Francis Journals, vol. 31(5), pages 641-652.
    4. Robert Dixon & John Freebairn & Guay Lim, 2007. "Time-varying equilibrium rates of unemployment: an analysis with Australian data," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 10(4), pages 205-225.
    5. Robert Dixon & John Freebairn & Emayenesh Seyoum-Tegegn, 2008. "State & Territory Beveridge Curvesand the National Equilibrium Unemployment Rate," Department of Economics - Working Papers Series 1033, The University of Melbourne.
    6. John Piggott & Bruce Chapman, 1995. "Costing the Job Compact," The Economic Record, The Economic Society of Australia, vol. 71(4), pages 313-328, December.
    7. N. Groenewold & A.J. Hagger, 1998. "The Australian Natural Rate of Unemployment: Some estimates from a structural VAR," Economics Discussion / Working Papers 98-23, The University of Western Australia, Department of Economics.
    8. Nicolaas Groenewold, 2003. "Long-Run Shifts of the Beveridge Curve and the Frictional Unemployment Rate in Australia," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 6(1), pages 65-82, March.
    9. Valadkhani, Abbas, 2006. "Unemployment Conundrum in Iran," Economics Working Papers wp06-15, School of Economics, University of Wollongong, NSW, Australia.
    10. Jeff Borland & Ian McDonald, 2000. "Labour Market Models of Unemployment in Australia," Melbourne Institute Working Paper Series wp2000n15, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    11. Bruce Chapman & Deborah Cobb‐Clark, 1999. "A Comparative Static Model of the Relationship between Immigration and the Short‐Run Job Prospects of Unemployed Residents," The Economic Record, The Economic Society of Australia, vol. 75(4), pages 358-368, December.
    12. A. J. Hagger & Nicolaas Groenewold, 2003. "Time to Ditch the Natural Rate?," The Economic Record, The Economic Society of Australia, vol. 79(246), pages 324-335, September.
    13. Bruce Chapman & Cezary Kapuscinsky, 2001. "The Transformation of Australia's Population, 1970 to 2030 Labour Force, Employment and Unemployment," CEPR Discussion Papers 436, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    14. Jeff Borland, 1996. "Job Creation and Job Destruction in Manufacturing Industry in Australia," The Economic Record, The Economic Society of Australia, vol. 72(216), pages 46-62, March.

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