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The Evolution of Employment and Unemployment in Australia

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  • Jerome Fahrer

    (Reserve Bank of Australia)

  • Alexandra Heath

    (Reserve Bank of Australia)

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    Abstract

    This paper poses two questions: why did the equilibrium rate of unemployment rise so much in the 1970s, and why does unemployment increase rapidly during recessions, but decrease so slowly in the subequent recovery, i.e. why is unemployment persistent? We find that equilibrium unemployment rose because of the economy’s inability to adjust to the adverse shocks of the time; employment contracted in some sectors but did not expand sufficiently in others. In answer to the second question, we find that the sources of persistence are different for men and women. Male unemployment has been persistent because, following a recession, employment is created in female dominated sectors, rather than the male dominated sectors which experienced the greatest decline in employment. Female unemployment has been persistent because the growth in the demand for female labour has been matched by the growth in its supply. Finally, we find that recessions appear to have a permanent effect on the sectoral composition of the economy; i.e., recessions are periods of accelerated structural change.

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    File URL: http://www.rba.gov.au/publications/rdp/1992/pdf/rdp9215.pdf
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    Bibliographic Info

    Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp9215.

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    Date of creation: Dec 1992
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    Handle: RePEc:rba:rbardp:rdp9215

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    1. Caballero, Ricardo J & Engel, Eduardo M R A, 1991. "Dynamic (S, s) Economies," Econometrica, Econometric Society, Econometric Society, vol. 59(6), pages 1659-86, November.
    2. 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.
    3. Abowd, John M & Zellner, Arnold, 1985. "Estimating Gross Labor-Force Flows," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 3(3), pages 254-83, June.
    4. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1991. "Stochastic trends and economic fluctuations," Working Paper Series, Macroeconomic Issues 91-4, Federal Reserve Bank of Chicago.
    5. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198284345, October.
    6. Junankar, P.N. & Kapuscinski, C.A., 1990. "The Duration Of Unemployment In Australia: Memory And Measurement," CEPR Discussion Papers 238, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    7. Gregory, R G, 1991. "Jobs and Gender: A Lego Approach to the Australian Labour Market," The Economic Record, The Economic Society of Australia, vol. 0(0), pages 20-40, Supplemen.
    8. Gregory, R G & McMahon, P & Whittingham, B, 1985. "Women in the Australian Labor Force: Trends, Causes, and Consequences," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 3(1), pages S293-309, January.
    9. Chapman, B.J. & Junankar, P.N. & Kapuscinski, C.A., 1992. "Long Term Unemployment : Projections and Policy," CEPR Discussion Papers 274, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    10. Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186 National Bureau of Economic Research, Inc.
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    Cited by:
    1. Ponomareva, Natalia & Sheen, Jeffrey, 2013. "Australian labor market dynamics across the ages," Economic Modelling, Elsevier, vol. 35(C), pages 453-463.

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