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The Unemployment/Vacancy Relationship in Australia

Author

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  • Jerome Fahrer

    (Reserve Bank of Australia)

  • Andrew Pease

    (Reserve Bank of Australia)

Abstract

One of the most important features of the Australian economy in the past two decades has been the structural deterioration of labour market performance, reflected in both an increase in the average rate of unemployment and an outward shift in the Beveridge Curve, which depicts the relationship between unemployment and vacancies. This paper attempts to uncover some of the causes for this structural deterioration, in terms of the factors affecting the UV relationship. We find that the Beveridge Curve shifted out around 1974, consistent with an increase in the equilibrium rate of unemployment which is generally agreed to have occurred around that time. Using gross labour market flow data, we also investigate the determinants of the equilibrium Beveridge Curve in the 1980s. We find that the Beveridge Curve shifted further outwards in the 1980s. The most important determinant of this shift was the decline in the search effectiveness of the unemployed, reflected in the increasing incidence of long-term unemployment. Offsetting this influence during this time was the declining labour force participation of men, and the very large increases in female employment.

Suggested Citation

  • Jerome Fahrer & Andrew Pease, 1993. "The Unemployment/Vacancy Relationship in Australia," RBA Research Discussion Papers rdp9305, Reserve Bank of Australia.
  • Handle: RePEc:rba:rbardp:rdp9305
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    File URL: http://www.rba.gov.au/publications/rdp/1993/pdf/rdp9305.pdf
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    References listed on IDEAS

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    1. Bowden, Roger J, 1980. "On the Existence and Secular Stability of u-v Loci," Economica, London School of Economics and Political Science, vol. 47(185), pages 35-50, February.
    2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    3. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    4. Jackman, Richard & Layard, Richard, 1991. "Does Long-term Unemployment Reduce a Person's Chance of a Job? A Time-Series Test," Economica, London School of Economics and Political Science, vol. 58(229), pages 93-106, February.
    5. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
    6. Olivier Jean Blanchard, 1989. "Two Tools for Analyzing Unemployment," NBER Working Papers 3168, National Bureau of Economic Research, Inc.
    7. George A. Akerlof & Janet L. Yellen, 1985. "Unemployment Through the Filter of Memory," The Quarterly Journal of Economics, Oxford University Press, vol. 100(3), pages 747-773.
    8. Bent Hansen, 1970. "Excess Demand, Unemployment, Vacancies, and Wages," The Quarterly Journal of Economics, Oxford University Press, vol. 84(1), pages 1-23.
    9. Budd, Alan & Levine, Paul & Smith, Peter, 1988. "Unemployment, Vacancies and the Long-term Unemployed," Economic Journal, Royal Economic Society, vol. 98(393), pages 1071-1091, December.
    10. Harper, Ian R, 1980. "The Relationship between Unemployment and Unfilled Vacancies in Australia: 1952-1978," The Economic Record, The Economic Society of Australia, vol. 56(154), pages 231-243, September.
    11. Jackman, R & Layard, Richard & Pissarides, C, 1989. "On Vacancies," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(4), pages 377-394, November.
    12. Borsch-Supan, Axel H, 1991. "Panel Data Analysis of the Beveridge Curve: Is There a Macroeconomic Relation between the Rate of Unemployment and the Vacancy Rate?," Economica, London School of Economics and Political Science, vol. 58(231), pages 279-297, August.
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    Cited by:

    1. A.J. Hagger & N. Groenewold, 2000. "Time to Ditch the Natural rate?," Economics Discussion / Working Papers 00-09, The University of Western Australia, Department of Economics.
    2. Anthony De Francesco, 1999. "The relationship between unemployment and vacancies in Australia," Applied Economics, Taylor & Francis Journals, vol. 31(5), pages 641-652.
    3. N. Groenewold & A.J. Hagger, 1998. "The Australian Natural Rate of Unemployment: Some estimates from a structural VAR," Economics Discussion / Working Papers 98-23, The University of Western Australia, Department of Economics.
    4. Jerome Fahrer & Andrew Pease, 1993. "The Unemployment-Vacancy Relationship in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 26(4), pages 43-57.

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