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How Tight is the Labour Market? Sources of Changes in the Aggregate Exit Rate from Unemployment across the Business Cycle

Forfattere:

Gaure, S. og Røed, K.

År:

2007

Referanse:

Journal of Business cycle Measurement and Analysis

Vol., 3, No. 2, 155 - 174.

Summary

We decompose variations in the aggregate exit rate from unemployment to employ-ment into two factors: i) Changes in the arrival rate of acceptable job offers; and ii) changes in the composition of the unemployment pool in terms of average employ-ability. We argue that the former of these factors provides the basis for an informative labour market tightness indicator, while the latter yields valuable information regard-ing the design of optimal labour market policies across the cycle. Based on Norwe-gian register data, we find that individual monthly exit rates tend to double from a cy-clical trough to a cyclical peak, ceteris paribus, but that cross-sectional heterogeneity nevertheless explains 88 per cent of the overall variation in individual monthly exit probabilities during the period from 1989 to 2002.

Nøkkelord:

Labour market tightness, Business cycles, Unemployment

JEL:

C41, E32, J64

Prosjekt info:

Oppdragsgiver: Aetat Arbeidsdirektoratet og Finansdepartementet
Oppdragsgivers prosjektnr.:
Frisch prosjekt: 1412 - Stramhetsindikator for arbeidsmarkedet

Kontakt:

knut.roed@frisch.uio.no

Finansiering:

the Norwegian Directorate of Labour and the Norwegian Ministry of Finance