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Shifts in the Beveridge Curve, job matching, and labor market dynamics

  • Hoyt Bleakley
  • Jeffrey C. Fuhrer

The Beveridge curve -- the scatter plot of unemployment rates versus vacancy rates -- has recently shifted inward dramatically. While the Beveridge curve is often used to summarize the state of the labor market, it is not a structural economic relationship. Thus, in order to understand the labor market implications of recent shifts in the curve, we must first understand the labor market activities that give rise to the Beveridge curve.> This article examines the Beveridge curve over the past 30 years. The authors discuss some of the issues surrounding the job-matching process and attempt to estimate the extent to which changes in the job-matching function are responsible for changes in the position of the Beveridge curve. They also consider other potential sources of shifts in the Beveridge curve, including shifts in the age and gender composition of the labor force and changes in the amount of "churning" in the labor market. They find significant increases in matching efficiency, significant drops in labor force growth, and a decrease in labor force churning, the sum of which account for the inward shift in the Beveridge curve since 1987.

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Article provided by Federal Reserve Bank of Boston in its journal New England Economic Review.

Volume (Year): (1997)
Issue (Month): Sep ()
Pages: 3-19

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Handle: RePEc:fip:fedbne:y:1997:i:sep:p:3-19
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  1. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, June.
  2. Katharine G. Abraham, 1987. "Help-Wanted Advertising, Job Vacancies, and Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1), pages 207-248.
  3. George A. Akerlof & Andrew K. Rose & Janet L. Yellen, 1988. "Job Switching and Job Satisfaction in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 495-594.
  4. 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.
  5. Joseph A. Ritter, 1993. "Measuring labor market dynamics: gross flows of workers and jobs," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 39-57.
  6. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
  7. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
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