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How Tight is the Labour Market?: Sources of Changes in the Aggregate Exit Rate from Unemployment across the Business Cycle

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  • Simen Gaure
  • Knut Røed

Abstract

We decompose variations in the aggregate exit rate from unemployment to employment into two factors: i) Changes in the arrival rate of acceptable job offers; and ii) changes in the composition of the unemployment pool in terms of average employability. We argue that the former of these factors provides the basis for an informative labour market tightness indicator, while the latter yields valuable information regarding the design of optimal labour market policies across the cycle. Based on Norwegian register data, we find that individual monthly exit rates tend to double from a cyclical trough to a cyclical peak, ceteris paribus, but that crosssectional heterogeneity nevertheless explains 88 per cent of the overall variation in individual monthly exit probabilities during the period from 1989 to 2002.

Suggested Citation

  • Simen Gaure & Knut Røed, 2008. "How Tight is the Labour Market?: Sources of Changes in the Aggregate Exit Rate from Unemployment across the Business Cycle," Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2007(2), pages 155-173.
    • Handle: RePEc:oec:stdkaa:5kzpq2xk8nms
    DOI: 10.1787/jbcma-v2007-art9-en
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    Citations

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    Cited by:

    1. Røed, Knut, 2012. "Active Unemployment Insurance," IZA Policy Papers 41, Institute of Labor Economics (IZA).
    2. Knut Røed & Jens Fredrik Skogstrøm, 2014. "Unemployment Insurance and Entrepreneurship," LABOUR, CEIS, vol. 28(4), pages 430-448, December.
    3. Bratsberg, Bernt & Fevang, Elisabeth & Røed, Knut, 2013. "Job loss and disability insurance," Labour Economics, Elsevier, vol. 24(C), pages 137-150.
    4. Inés Hardoy & Pål Schøne, 2014. "Does the impact of plant closure on labour market attachment differ between immigrants and native workers across the business cycle?," Empirical Economics, Springer, vol. 46(1), pages 229-252, February.
    5. Gaure, Simen & Røed, Knut & Westlie, Lars, 2008. "The Impacts of Labor Market Policies on Job Search Behavior and Post-Unemployment Job Quality," Memorandum 22/2008, Oslo University, Department of Economics.
    6. Gaure, Simen & Røed, Knut & Westlie, Lars, 2012. "Job search incentives and job match quality," Labour Economics, Elsevier, vol. 19(3), pages 438-450.

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