Unemployment Dynamics in the OECD

47 Pages Posted: 15 Jan 2009 Last revised: 11 Dec 2022

See all articles by Michael Elsby

Michael Elsby

School of Economics, University of Edinburgh

Bart Hobijn

ASU

Aysegul Sahin

Federal Reserve Bank of New York

Date Written: December 2008

Abstract

We provide a set of comparable estimates for the rates of inflow to and outflow from unemployment for fourteen OECD economies using publicly available data. We then devise a method to decompose changes in unemployment into contributions accounted for by changes in inflow and outflow rates for cases where unemployment deviates from its flow steady state, as it does in many countries. Our decomposition reveals that fluctuations in both inflow and outflow rates contribute substantially to unemployment variation within countries. For Anglo-Saxon economies we find approximately a 20:80 inflow/outflow split to unemployment variation, while for Continental European countries, we observe much closer to a 50:50 split. Using the estimated flow rates we compute gross worker flows into and out of unemployment. In all economies we observe that increases in inflows lead increases in unemployment, whereas outflows lag a ramp up in unemployment.

Suggested Citation

Elsby, Michael and Hobijn, Bart and Sahin, Aysegul, Unemployment Dynamics in the OECD (December 2008). NBER Working Paper No. w14617, Available at SSRN: https://ssrn.com/abstract=1327238

Michael Elsby (Contact Author)

School of Economics, University of Edinburgh ( email )

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Bart Hobijn

ASU ( email )

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Aysegul Sahin

Federal Reserve Bank of New York ( email )

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New York, NY 10045
United States