Applying endogenous job search to unemployment dynamics with flows data : Australian evidence

Wee, Albert Ann Soon. (2002). Applying endogenous job search to unemployment dynamics with flows data : Australian evidence Honours Thesis, School of Economics, The University of Queensland.

       
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Author Wee, Albert Ann Soon.
Thesis Title Applying endogenous job search to unemployment dynamics with flows data : Australian evidence
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 2002
Thesis type Honours Thesis
Total pages 145
Language eng
Subjects 14 Economics
Formatted abstract Unemployment reduction in Australia is once again a mainstream political and economic objective. We suggest a different way of looking at the problem of unemployment that is by looking at the flows of the labour market and their transition rates. The most exciting model to emerge in recent years is the Endogenous Job Search Model of Burgess and Turon (2000) because its results include an asymmetric response of the unemployment rate to the cycle and a sluggish return to equilibrium when unemployment suffers a large adverse shock. Significantly, this mirrors closely unemployment experience not only in Europe and America but also here in Australia as well. The task we are charged with here is to verify the basic propositions of the Endogenous Job Search Model which is that the outflow rate matters more than the inflow rate in terms of their influence on variations in the aggregate unemployment rate through time. In our empirical enquiries, we check if this is the case by asking which is the dominant as well as the initiating flow effect. Our results tell us that we cannot be sure about the dominant flow effect across time but there is a clear pattern towards the 1990s that the inflow rate is indeed the flow effect that leads the outflow rate that is it is the channel by which unemployment shocks primarily transmit. In addition, we repeat previous analysis on the cyclicality of flows this time using new data and confirm the counter-cyclicality of male flows into and out of unemployment. On the other hand, female flows were found to be significantly pro-cyclical.

 
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