A PICTURE OF STOCK–FLOW UNEMPLOYMENT IN THE UNITED KINGDOM

Melvyn Coles, Paul Jones and Eric Smith

Macroeconomic Dynamics, 2010, vol. 14, issue 4, 427-453

Abstract: Stock–flow job matching implies that there are two types of job seekers—those on the short side of their occupations who can easily find work, and those on the long side who expect extended unemployment spells. Using matching data and information on completed and uncompleted unemployment spells for England and Wales, this paper uses the stock–flow matching hypothesis to identify the fraction (incidence) of laid off workers who find themselves on the long side of the market and, conditional on being on the long side, their expected unemployment duration. The average incidence is around one-half and increases significantly in recessions. The expected duration is also strongly countercyclical—peaking at 15 months in the 1990–1992 recession and falling to a more modest 9 months by January 1999. Cross-section estimates also identify a North–South divide and a large city effect—the unemployed in large cities and in the North experience longer spells.

Date: 2010
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