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The Ins and Outs of UK Unemployment

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  • Smith, Jennifer

    (Department of Economics, University of Warwick)

Abstract

This paper shows that in the UK, increases in unemployment in a recession are driven by rises in the separation rate. A new decomposition of unemployment dynamics is devised that does not require unemployment to be in steady state at all times. This is important because low UK transition rates – one quarter the size of the US –imply substantial deviation of unemployment from steady state near cyclical turning points. In periods of moderation, the job finding rate is shown to have most influence on UK unemployment dynamics. Evidence comes from the first study of monthly data derived from individuals’ labour market spells recorded in the British Household Panel Survey from 1988 to 2008.

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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 944.

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Date of creation: 2010
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Handle: RePEc:wrk:warwec:944

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Keywords: Unemployment dynamics ; Job finding rate ; Separation rate JEL Classification: E24 ; E32;

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  1. Mark Gertler & Antonella Trigari, 2006. "Unemployment fluctuations with staggered Nash wage bargaining," Proceedings, Federal Reserve Bank of San Francisco.
  2. Robert Shimer, 2007. "Reassessing the Ins and Outs of Unemployment," NBER Working Papers 13421, National Bureau of Economic Research, Inc.
  3. 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.
  4. Shigeru Fujita & Garey Ramey, 2006. "The cyclicality of job loss and hiring," Working Papers 06-17, Federal Reserve Bank of Philadelphia.
  5. Michael Elsby & Bart Hobijn & Aysegül Sahin, 2009. "Unemployment dynamics in the OECD," Working Paper Series 2009-04, Federal Reserve Bank of San Francisco.
  6. Shigeru Fujita & Garey Ramey, 2009. "The Cyclicality Of Separation And Job Finding Rates," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 415-430, 05.
  7. Barnichon, Regis, 2012. "Vacancy posting, job separation and unemployment fluctuations," Journal of Economic Dynamics and Control, Elsevier, vol. 36(3), pages 315-330.
  8. Michael W. L. Elsby & Jennifer C. Smith & Jonathan Wadsworth, 2011. "The Role of Worker Flows in the Dynamics and Distribution of UK Unemployment," CEP Discussion Papers dp1058, Centre for Economic Performance, LSE.
  9. Yashiv, Eran, 2006. "U.S. Labor Market Dynamics Revisited," IZA Discussion Papers 2455, Institute for the Study of Labor (IZA).
  10. Abowd, John M & Zellner, Arnold, 1985. "Estimating Gross Labor-Force Flows," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(3), pages 254-83, June.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Creative destruction and job flows
    by chris dillow in Stumbling and Mumbling on 2010-12-03 14:08:54
  2. Irrationality & the benefits debate
    by chris dillow in Stumbling and Mumbling on 2013-01-10 14:11:54
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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 2013-05, Federal Reserve Bank of San Francisco.
  2. Hertweck, Matthias Sebastian & Sigrist, Oliver, 2013. "The Aggregate Effects of the Hartz Reforms in Germany," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79942, Verein für Socialpolitik / German Economic Association.
  3. 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.
  4. Jean-Olivier Hairault & Thomas Le Barbanchon & Thepthida Sopraseuth, 2012. "The Cyclicality of the Separation and Job Finding Rates in France," Working Papers 2012-22, Centre de Recherche en Economie et Statistique.
  5. Marianna Kudlyak & Felipe Schwartzman, 2012. "Accounting for unemployment in the Great Recession : nonparticipation matters," Working Paper 12-04, Federal Reserve Bank of Richmond.
  6. José I. Silva & Javier Vázquez-Grenno, 2012. "The ins and outs of unemployment in a two-tier labor market," Working Papers 2012/17, Institut d'Economia de Barcelona (IEB).
  7. Jósef Sigurdsson, 2011. "Unemployment Dynamics and Cyclical Fluctuations in the Icelandic Labour Market," Economics wp56, Department of Economics, Central bank of Iceland.
  8. 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.
  9. Ching-Yang Lin & Hiroaki Miyamoto, 2010. "Gross Worker Flows and Unemployment Dynamics in Japan," Working Papers EMS_2010_07, Research Institute, International University of Japan.
  10. 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].
  11. Elsby, Michael W.L. & Smith, Jennifer C. & Wadsworth, Jonathan, 2011. "The role of worker flows in the dynamics and distribution of UK unemployment," The Warwick Economics Research Paper Series (TWERPS) 962, University of Warwick, Department of Economics.
  12. Daniel Gutknecht, 2013. "Testing for Monotonicity under Endogeneity An Application to the Reservation Wage Function," Economics Series Working Papers 673, University of Oxford, Department of Economics.
  13. Brian Silverstone & Will Bell, 2011. "Gross Labour Market Flows in New Zealand: Some Questions and Answers," Working Papers in Economics 11/15, University of Waikato, Department of Economics.

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