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Unemployment Dynamics, Duration and Equilibrium: Evidence from Britain

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Author Info
S Burgess
H Turon

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Abstract

This paper challenges the consensus on the nature of unemployment dynamics in Britain. We show that the argument that changes in unemployment arise mostly from changes in the duration of unemployment (rather than in the chance of becoming unemployed) is flawed. In fact, while shocks to the outflow do have a part to play up to the late 1970s, the huge changes in unemployment over the last two decades have been mostly driven by inflow shocks. Our model also provides a new explanation of aggregate unemployment persistence based on externalities at a market level rather than individual-level persistence.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number 0474.

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Date of creation: Nov 2000
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Handle: RePEc:cep:cepdps:0474

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Keywords: Unemployment dynamics unemployment duration unemployment flows nonlinear dynamics persistence

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Burgess, Simon M., 1994. "Matching models and labour market flows," European Economic Review, Elsevier, vol. 38(3-4), pages 809-816, April. [Downloadable!] (restricted)
  2. Layard, Richard & Nickell, Stephen, 1986. "Unemployment in Britain," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S121-69, Supplemen. [Downloadable!] (restricted)
  3. Jaap H. Abbring & Gerard J. van den Berg & Jan C. van Ours, 1997. "Business Cycles and Compositional Variation in U.S. Unemployment," Tinbergen Institute Discussion Papers 97-050/3, Tinbergen Institute. [Downloadable!]
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  4. Abbring, Jaap H & van den Berg, Gerard J & van Ours, Jan C, 1995. "The Anatomy of Unemployment Dynamics," CEPR Discussion Papers 1202, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Burgess, Simon M, 1992. "A Search Model with Job Changing Costs: 'Eurosclerosis' and Unemployment," Oxford Economic Papers, Oxford University Press, vol. 44(1), pages 75-88, January. [Downloadable!] (restricted)
  6. Burda, Michael & Wyplosz, Charles, 1994. "Gross worker and job flows in Europe," European Economic Review, Elsevier, vol. 38(6), pages 1287-1315, June. [Downloadable!] (restricted)
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  7. Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. D Mortensen & C Pissarides, 1999. "Job Reallocation, Employment Fluctuations and Unemployment," CEP Discussion Papers 0421, Centre for Economic Performance, LSE.
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  9. Mortensen, Dale T., 1994. "The cyclical behavior of job and worker flows," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1121-1142, November. [Downloadable!] (restricted)
  10. Boeri, Tito, 1998. "Enforcement of Employment Security Regulations, On-The-Job Search and Unemployment Duration," CEPR Discussion Papers 1850, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  11. Patricia M. Anderson & Simon M. Burgess, 1995. "Empirical Matching Functions: Estimation and Interpretation Using Disaggregate Data," NBER Working Papers 5001, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Burgess, Simon & Lane, Julia & Stevens, David, 2000. "Job Flows, Worker Flows, and Churning," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 473-502, July. [Downloadable!] (restricted)
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  13. Bean, Charles R, 1994. "European Unemployment: A Survey," Journal of Economic Literature, American Economic Association, vol. 32(2), pages 573-619, June. [Downloadable!] (restricted)
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  14. van den Berg, Gerard J & van Ours, Jan C, 1996. "Unemployment Dynamics and Duration Dependence," Journal of Labor Economics, University of Chicago Press, vol. 14(1), pages 100-125, January. [Downloadable!] (restricted)
  15. Burgess, Simon & Profit, Stefan, 1998. "Externalities in the Matching of Workers and Firms in Britain," CEPR Discussion Papers 1854, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  16. Burgess, Simon M, 1992. "The Flow into Unemployment in Britain," Economic Journal, Royal Economic Society, vol. 102(413), pages 888-95, July. [Downloadable!] (restricted)
  17. Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-16, May. [Downloadable!] (restricted)
  18. Karanassou, Marika & Snower, Dennis J, 1998. "How Labour Market Flexibility Affects Unemployment: Long-Term Implications of the Chain Reaction Theory," Economic Journal, Royal Economic Society, vol. 108(448), pages 832-49, May. [Downloadable!] (restricted)
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  19. Olivier Jean Blanchard & Peter Diamond, 1990. "The Beveridge Curve," NBER Reprints 1405, National Bureau of Economic Research, Inc.
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  20. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 397-415, July. [Downloadable!] (restricted)
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  21. Helene Turon, 2003. "Inflow Composition, Duration Dependence and Their Impact on The Unemployment Outflow Rate," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(1), pages 31-47, February. [Downloadable!] (restricted)
  22. Junankar, P N & Price, Simon, 1984. "The Dynamics of Unemployment: Structural Change and Unemployment Flows," Economic Journal, Royal Economic Society, vol. 94(376a), pages 158-65, Supplemen.
  23. Layard, R. & Nickell, S., . "Layard-Nickell," Instructional Stata datasets for econometrics layardnickell, Boston College Department of Economics. [Downloadable!]
  24. Price, Simon, 1985. "The Determinants of Equilibrium Unemployment in Britain: A Comment," Economic Journal, Royal Economic Society, vol. 95(377), pages 189-95, March. [Downloadable!] (restricted)
  25. Olivier Jean Blanchard & Peter Diamond, 1991. "The Cyclical Behavior of the Gross Flows of U.S. Workers," NBER Reprints 1582, National Bureau of Economic Research, Inc.
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  26. Darby, Michael R & Haltiwanger, John C & Plant, Mark W, 1985. "Unemployment Rate Dynamics and Persistent Unemployment under Rational Expectations," American Economic Review, American Economic Association, vol. 75(4), pages 614-37, September. [Downloadable!] (restricted)
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  27. S Machin & A Manning, 1998. "The Causes and Consequences of Long-Term Unemployment in Europe," CEP Discussion Papers 0400, Centre for Economic Performance, LSE. [Downloadable!]
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  28. Dale Mortensen, 1984. "Job Search and Labor Market Analysis," Discussion Papers 594, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  29. Lancaster, Tony, 1979. "Econometric Methods for the Duration of Unemployment," Econometrica, Econometric Society, vol. 47(4), pages 939-56, July. [Downloadable!] (restricted)
  30. Nickell, S J, 1985. "The Determinants of Equilibrium Unemployment in Britain: A Reply," Economic Journal, Royal Economic Society, vol. 95(377), pages 196-98, March. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alan Manning, 2001. "A Generalised Model of Monopsony," CEP Discussion Papers 0499, Centre for Economic Performance, LSE. [Downloadable!]
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  2. C Dougherty, 2000. "Numeracy, Literacy and Earnings: Evidence from the National Longitudinal Survey of Youth," CEP Discussion Papers 0478, Centre for Economic Performance, LSE. [Downloadable!]
  3. Brian Bell & James Smith, . "On gross worker flows in the United Kingdom: evidence from the Labour Force Survey," Bank of England working papers 160, Bank of England. [Downloadable!]
  4. H G Overman, 2000. "Neighbourhood Effects in Small Neighbourhoods," CEP Discussion Papers 0481, Centre for Economic Performance, LSE. [Downloadable!]
  5. S Gomulka, 2000. "Pension Problems and Reforms in the Czech Republic, Hungary, Poland and Romania," CEP Discussion Papers 0480, Centre for Economic Performance, LSE. [Downloadable!]
  6. Muriel Dejemeppe & Yves Saks, 2002. "A New Light into Regional Unemployment Disparities in Belgium : Longitudinal Analysis of Grouped Duration Data," Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Discussion Paper 2002019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  7. Stephen Nickell & Glenda Quintini, 2001. "Nominal Wage Rigidity and the Rate of Inflation," CEP Discussion Papers 0489, Centre for Economic Performance, LSE. [Downloadable!]
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  8. S Nickell & T Jones & G Quintini, 2000. "A Picture of Job Insecurity Facing British Men," CEP Discussion Papers 0479, Centre for Economic Performance, LSE. [Downloadable!]
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  9. G Duranton & V Monastiriotis, 2000. "Mind the Gaps: the Evolution of Regional Inequalities in the UK, 1982-1997," CEP Discussion Papers 0485, Centre for Economic Performance, LSE. [Downloadable!]
  10. Vincenzo Cassino & Michael Joyce, . "Forecasting inflation using labour market indicators," Bank of England working papers 195, Bank of England. [Downloadable!]
  11. Burgess, Simon & Turon, Hélène, 2003. "Unemployment Equilibrium and On-the-Job Search," IZA Discussion Papers 753, Institute for the Study of Labor (IZA). [Downloadable!]
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  12. Adriana Di Liberto & James Symons, 2001. "Education and Italian Regional Development," CEP Discussion Papers 0496, Centre for Economic Performance, LSE. [Downloadable!]
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  13. Simon Burgess & Helene Turon, 2005. "Worker Flows, Job Flows and Unemployment in a Matching Model," Bristol Economics Discussion Papers 05/572, Department of Economics, University of Bristol, UK. [Downloadable!]
  14. D Marsden & S French & K Kubo, 2000. "Why Does Performance Pay De-Motivate: Financial Incentives versus Perfrormance Appraisal," CEP Discussion Papers 0476, Centre for Economic Performance, LSE. [Downloadable!]
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