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A Framework For Understanding Changes In The Unemployment Rate In A Flows Context: An Examination Net Flows In The Australian Labour Market

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Author Info

  • Robert Dixon
  • John Freebairn
  • G. C. Lim

Abstract

In this paper we develop a framework which is appropriate for the systematic investigation of the relationship between net (and gross) flows between different labour market states and movements in the unemployment rate. We use that framework to investigate the behaviour of net flows of persons between employment, unemployment and not in the labour force in Australia between 1979-2003 and the relationship of these flows to changes in the unemployment rate over that period. We find that: flows from unemployment to employment exceed flows from employment to unemployment and that this is the case even in recessions; flows from employment to not in the labour force exceed flows from not in the labour force to employment and that this is the case even in booms, and; flows from not in the labour force to unemployment exceed flows from unemployment to not in the labour force even in recessions. Another important finding is that the reason why the participation rate is negatively correlated with the unemployment rate is because net flows from employment to both unemployment and to not in the labour force are highly correlated. It cannot be explained by flows occurring between unemployment and not in the labour force.

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Bibliographic Info

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 910.

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Length: 28 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:mlb:wpaper:910

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Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
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Web page: http://www.economics.unimelb.edu.au
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Related research

Keywords: Worker Flows Business Cycle Unemployment Participation Rate;

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References

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  1. Robert Dixon & John Freebairn & G. C. Lim, 2002. "Why Are Recessions As Deep As They Are? The Behaviour Over Time Of The Outflow From Unemployment: A New Perspective," Department of Economics - Working Papers Series 842, The University of Melbourne.
  2. Dixon, R. & Lim, G.C. & Thomson, J., 2001. "Australian Gross Flows Data: The Labour Force Survey and the Size of the Population Represented by the Matched Sample," Department of Economics - Working Papers Series 810, The University of Melbourne.
  3. Dixon, R., 2001. "Australian Labour Force Data: How Representative is the 'Population Represented by the Matched Sample'?," Department of Economics - Working Papers Series 772, The University of Melbourne.
  4. Brian Bell & James Smith, 2002. "On gross worker flows in the United Kingdom: evidence from the Labour Force Survey," Bank of England working papers 160, Bank of England.
  5. Jeff Borland, 1996. "Labour Market Flows Data for Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 29(2), pages 225-235.
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Cited by:
  1. Chindamo, P., 2011. "Australian Labour Market Flows over the Business Cycle," Australian Bulletin of Labour, National Institute of Labour Studies, vol. 37(1), pages 127-137.

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