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Countercyclical Unemployment Outflows and Labour Reallocation

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  • Gareth Leeves

Abstract

The distinction between job and excess worker reallocation in a model proposed by Burda and Wyplosz (1994) offers a possible explanation for the observed empirical regularity of countercyclical gross flows of workers from unemployment to employment. Previous descriptions of gross flow cyclical adjustment have not adequately accounted for the role of excess worker reallocation in labour market adjustment. This paper investigates the characteristics of Australian gross flow relationships between unemployment and employment, using a structural VAR methodology, for evidence of patterns consistent with the dynamic behaviour of labour reallocation proposed by the Burda and Wyplosz model. The results provide support for a description of labour market adjustment in the last Australian recession as a combination of job and excess worker reallocation effects, as implied by the model, and highlight the role played by excess worker reallocation in generating countercyclical UE flows. The paper also considers the interrelationship between labour reallocation and long‐term unemployment and the flow adjustment patterns of males and females.

Suggested Citation

  • Gareth Leeves, 1999. "Countercyclical Unemployment Outflows and Labour Reallocation," Australian Economic Papers, Wiley Blackwell, vol. 38(3), pages 290-309, September.
    • Handle: RePEc:bla:ausecp:v:38:y:1999:i:3:p:290-309
    DOI: 10.1111/1467-8454.00058
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    Cited by:

    1. Phillip Chindamo & Lawrence Uren, 2010. "Vacancies and Unemployment in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(2), pages 136-152, June.
    2. David C Maré & Wai Kin Choy, 2001. "Regional Labour Market Adjustment and the Movements of People: A Review," Treasury Working Paper Series 01/08, New Zealand Treasury.

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