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The Role of Worker Flows in the Dynamics and Distribution of UK Unemployment

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Author Info

  • Elsby, Michael

    ()
    (University of Edinburgh)

  • Smith, Jennifer C.

    ()
    (University of Warwick)

  • Wadsworth, Jonathan

    ()
    (Royal Holloway, University of London)

Abstract

Unemployment varies substantially over time and across subgroups of the labour market. Worker flows among labour market states act as key determinants of this. We examine how the structure of unemployment across groups and its cyclical movements across time are shaped by changes in labour market flows. Using novel estimates of flow transition rates for the UK over the last 35 years, we decompose unemployment variation into parts accounted for by changes in rates of job loss, job finding and flows via non-participation. Close to two-thirds of the volatility of unemployment in the UK over this period can be traced to rises in rates of job loss that accompany recessions. The share of this inflow contribution has been broadly the same in each of the past three recessions. Decreased job-finding rates account for around one-quarter of unemployment cyclicality and the remaining variation can be attributed to flows via non-participation. Digging deeper into the structure of unemployment by gender, age and education, the flow-approach is shown to provide a richer understanding of the unemployment experiences across population subgroups.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5784.

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Length: 40 pages
Date of creation: Jun 2011
Date of revision:
Publication status: published in: Oxford Review of Economic Policy, 2011, 27 (2), 338-363
Handle: RePEc:iza:izadps:dp5784

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Keywords: worker flows; unemployment; labour market;

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  1. Jennifer C. Smith, 2011. "The Ins and Outs of UK Unemployment," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 121(552), pages 402-444, 05.
  2. Gregg, Paul & Wadsworth, Jonathan, 1995. "A Short History of Labour Turnover, Job Tenure, and Job Security, 1975-93," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 11(1), pages 73-90, Spring.
  3. Michael Elsby & Bart Hobijn & Aysegul Sahin, 2008. "Unemployment Dynamics in the OECD," NBER Working Papers 14617, National Bureau of Economic Research, Inc.
  4. Simon Burgess & Hélène Turon, 2005. "Unemployment dynamics in Britain," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(503), pages 423-448, 04.
  5. George L. Perry, 1972. "Unemployment Flows in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 3(2), pages 245-292.
  6. Michael W. Elsby & Ryan Michaels & Gary Solon, 2007. "The Ins and Outs of Cyclical Unemployment," NBER Working Papers 12853, National Bureau of Economic Research, Inc.
  7. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, American Economic Association, vol. 83(4), pages 685-709, September.
  8. Gomes, Pedro, 2012. "Labour market flows: Facts from the United Kingdom," Labour Economics, Elsevier, Elsevier, vol. 19(2), pages 165-175.
  9. Shigeru Fujita & Garey Ramey, 2007. "The cyclicality of separation and job finding rates," Working Papers 07-19, Federal Reserve Bank of Philadelphia.
  10. Robert Shimer, 2007. "Reassessing the Ins and Outs of Unemployment," NBER Working Papers 13421, National Bureau of Economic Research, Inc.
  11. Michael W.L. Elsby & Jennifer C. Smith, 2010. "The Great Recession In The Uk Labour Market: A Transatlantic Perspective," National Institute Economic Review, National Institute of Economic and Social Research, National Institute of Economic and Social Research, vol. 214(1), pages R26-R37, October.
  12. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199279173, October.
  13. Peter J. Kuhn (ed.), 2002. "Losing Work, Moving On: International Perspectives on Worker Displacement," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, W.E. Upjohn Institute for Employment Research, number lwmo.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. "Strivers" vs "scroungers": a false dichotomy
    by chris dillow in Stumbling and Mumbling on 2012-12-11 14:50:45
  2. Recovery for whom?
    by chris dillow in Stumbling and Mumbling on 2013-09-16 13:50:18
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Cited by:
  1. Michael W.L. Elsby & Bart Hobijn & Aysegül Sahin, 2013. "On the importance of the participation margin for market fluctuations," Working Paper Series, Federal Reserve Bank of San Francisco 2013-05, Federal Reserve Bank of San Francisco.
  2. Jean-Olivier Hairault & François Langot & Thepthida Sopraseuth, 2014. "Why is Old Workers' Labor Market more Volatile? Unemployment Fluctuations over the Life-Cycle," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00972291, HAL.
  3. Marianna Kudlyak & Felipe Schwartzman, 2012. "Accounting for unemployment in the Great Recession : nonparticipation matters," Working Paper, Federal Reserve Bank of Richmond 12-04, Federal Reserve Bank of Richmond.
  4. Ieva Brauksa & Ludmila Fadejeva, 2013. "Internal Labour Market Mobility in 2005-2011: The Case of Latvia," Working Papers, Latvijas Banka 2013/02, Latvijas Banka.
  5. Jennifer C. Smith, 2011. "The Ins and Outs of UK Unemployment," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 121(552), pages 402-444, 05.
  6. Nordmeier, Daniela, 2012. "Worker flows in Germany: Inspecting the time aggregation bias," IAB Discussion Paper 201212, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  7. Zuzanna Brzozowska, 2013. "Was falling fertility in the communist Poland driven by changes in women’s education?," Working Papers 54, Institute of Statistics and Demography, Warsaw School of Economics.
  8. Bonthuis, Boele & Jarvis, Valerie & Vanhala, Juuso, 2013. "What’s going on behind the euro area Beveridge curve(s)?," Working Paper Series, European Central Bank 1586, European Central Bank.
  9. Anna Baranowska-Rataj & Iga Magda, 2013. "Decomposition of trends in youth unemployment – the role of job accessions and separations in countries with different employment protection regimes," Working Papers 53, Institute of Statistics and Demography, Warsaw School of Economics.

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