IDEAS home Printed from https://ideas.repec.org/p/mlb/wpaper/910.html
   My bibliography  Save this paper

A Framework For Understanding Changes In The Unemployment Rate In A Flows Context: An Examination Net Flows In The Australian Labour Market

Author

Listed:
  • Robert Dixon
  • John Freebairn
  • G. C. Lim

Abstract

In this paper we develop a framework which is appropriate for the systematic investigation of the relationship between net (and gross) flows between different labour market states and movements in the unemployment rate. We use that framework to investigate the behaviour of net flows of persons between employment, unemployment and not in the labour force in Australia between 1979-2003 and the relationship of these flows to changes in the unemployment rate over that period. We find that: flows from unemployment to employment exceed flows from employment to unemployment and that this is the case even in recessions; flows from employment to not in the labour force exceed flows from not in the labour force to employment and that this is the case even in booms, and; flows from not in the labour force to unemployment exceed flows from unemployment to not in the labour force even in recessions. Another important finding is that the reason why the participation rate is negatively correlated with the unemployment rate is because net flows from employment to both unemployment and to not in the labour force are highly correlated. It cannot be explained by flows occurring between unemployment and not in the labour force.

Suggested Citation

  • Robert Dixon & John Freebairn & G. C. Lim, 2004. "A Framework For Understanding Changes In The Unemployment Rate In A Flows Context: An Examination Net Flows In The Australian Labour Market," Department of Economics - Working Papers Series 910, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:910
    as

    Download full text from publisher

    File URL: http://www.economics.unimelb.edu.au/downloads/wpapers-04/910.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Brian Bell & James Smith, 2002. "On gross worker flows in the United Kingdom: evidence from the Labour Force Survey," Bank of England working papers 160, Bank of England.
    2. Dixon, R., 2001. "Australian Labour Force Data: How Representative is the 'Population Represented by the Matched Sample'?," Department of Economics - Working Papers Series 772, The University of Melbourne.
    3. Robert Dixon & John Freebairn & Guay Lim, 2003. "Why are recessions as deep as they are? The behaviour over time of the outflow from unemployment: a new perspective," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 6(1), pages 37-64, March.
    4. Jeff Borland, 1996. "Labour Market Flows Data for Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 29(2), pages 225-235, April.
    5. Jerome Fahrer & Alexandra Heath, 1992. "The Evolution of Employment and Unemployment in Australia," RBA Research Discussion Papers rdp9215, Reserve Bank of Australia.
    6. William Foster, 1981. "Gross Flows in the Australian Labour Market A First Look," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 14(4), pages 57-64, December.
    7. Robert Dixon, 2001. "Australian Labour Force Data: How Representative is the ‘Population Represented by the Matched Sample’?," The Economic and Labour Relations Review, , vol. 12(2), pages 303-330, December.
    8. Robert Dixon & G.C. Lim, 2002. "Australian gross flows data: the labour force survey and the size of the population represented by the matched sample," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 5(1), pages 1-21, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrew Evans, 2018. "Okun coefficients and participation coefficients by age and gender," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-22, December.
    2. Andrew E. Evans, 2020. "Average labour productivity dynamics over the business cycle," Empirical Economics, Springer, vol. 59(4), pages 1833-1863, October.
    3. Chindamo, Phillip, 2010. "Australian labour market flows over the business cycle," MPRA Paper 35710, University Library of Munich, Germany.
    4. Natalia Ponomareva & Jeffrey Sheen, 2010. "Cyclical Flows in Australian Labour Markets," The Economic Record, The Economic Society of Australia, vol. 86(s1), pages 35-48, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robert Dixon & John Freebairn & Guay Lim, 2005. "An Examination of Net Flows in the Australian Labour Market," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 8(1), pages 25-42, March.
    2. Robert Dixon & G. C. Lim & Jan C. van Ours, 2015. "The effect of shocks to labour market flows on unemployment and participation rates," Applied Economics, Taylor & Francis Journals, vol. 47(24), pages 2523-2539, May.
    3. Robert Dixon, 2007. "Common Cycles in Labour Market Separation Rates for Australian States," Department of Economics - Working Papers Series 991, The University of Melbourne.
    4. Robert Dixon & John Freebairn & Guay Lim, 2003. "Why are recessions as deep as they are? The behaviour over time of the outflow from unemployment: a new perspective," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 6(1), pages 37-64, March.
    5. Jeff Borland, 2009. "What Happens to the Australian Labour Market in Recessions?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(2), pages 232-242, June.
    6. Robert Dixon, 2007. "Regional Differences in the Severity of Recessions in the UK," Department of Economics - Working Papers Series 1009, The University of Melbourne.
    7. Robert Dixon & John Freebairn & Guay Lim, 2007. "Time-varying equilibrium rates of unemployment: an analysis with Australian data," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 10(4), pages 205-225.
    8. Natalia Ponomareva & Jeffrey Sheen, 2010. "Cyclical Flows in Australian Labour Markets," The Economic Record, The Economic Society of Australia, vol. 86(s1), pages 35-48, September.
    9. Robert Dixon, 2001. "Australian Labour Force Data: How Representative is the ‘Population Represented by the Matched Sample’?," The Economic and Labour Relations Review, , vol. 12(2), pages 303-330, December.
    10. 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.
    11. Ponomareva, Natalia & Sheen, Jeffrey, 2013. "Australian labor market dynamics across the ages," Economic Modelling, Elsevier, vol. 35(C), pages 453-463.
    12. Chew Lian Chua & Robert Dixon & G. C. Lim, 2007. "What Drives Worker Flows?," Melbourne Institute Working Paper Series wp2007n34, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    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.
    14. Michael W. L. Elsby & Jennifer C. Smith & Jonathan Wadsworth, 2021. "Population growth, immigration and labour market dynamics," CEP Discussion Papers dp1814, Centre for Economic Performance, LSE.
    15. Jeff Borland, 1996. "Labour Market Flows Data for Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 29(2), pages 225-235, April.
    16. Brian Bell & James Smith, 2004. "Health, disability insurance and labour force participation," Bank of England working papers 218, Bank of England.
    17. Gomes, Pedro, 2012. "Labour market flows: Facts from the United Kingdom," Labour Economics, Elsevier, vol. 19(2), pages 165-175.
    18. Jerome Fahrer & Andrew Pease, 1993. "The Unemployment/Vacancy Relationship in Australia," RBA Research Discussion Papers rdp9305, Reserve Bank of Australia.
    19. Anthony De Francesco, 1999. "The relationship between unemployment and vacancies in Australia," Applied Economics, Taylor & Francis Journals, vol. 31(5), pages 641-652.
    20. Zanetti, Francesco, 2011. "Labor market institutions and aggregate fluctuations in a search and matching model," European Economic Review, Elsevier, vol. 55(5), pages 644-658, June.

    More about this item

    Keywords

    Worker Flows Business Cycle Unemployment Participation Rate;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mlb:wpaper:910. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dandapani Lokanathan (email available below). General contact details of provider: https://edirc.repec.org/data/demelau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.