Discussion Paper Details

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Title: Unemployment Dynamics, Duration and Equilibrium: Evidence from Britain

Author(s): Simon Burgess and Hélène Turon

Publication Date: June 2000

Keyword(s): Non-Linear Dynamics, Persistence, Unemployment Duration, Unemployment Dynamics and Unemployment Flows

Programme Area(s): Labour Economics

Abstract: This Paper challenges the consensus on the nature of unemployment dynamics in Britain. We show that the argument that changes in unemployment arise mostly from changes in the duration of unemployment (rather than in the event of becoming unemployed) is flawed. In fact, while shocks to the outflow do have a part to play up to the late 1970s, the huge changes in unemployment over the last two decades have been mostly driven by inflow shocks. Our model also provides a new explanation of aggregate unemployment persistence based on externalities at a market level rather than individual-level persistence.

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Bibliographic Reference

Burgess, S and Turon, H. 2000. 'Unemployment Dynamics, Duration and Equilibrium: Evidence from Britain'. London, Centre for Economic Policy Research.