Equilibrium Unemployment in Australia: Concepts and Measurement*

This paper reviews some concepts of equilibrium unemployment and outlines the fundamental difficulties facing any attempt to produce estimates of the equilibrium rate of unemployment. It develops simple quasi-reduced form models of aggregate unemployment based on rival non market-clearing and market-clearing theories. These equations form the basis of an empirical model of aggregate unemployment in Australia since 1969. The empirical evidence suggests that most of the observed increase in unemployment can be attributed to cyclical rather than structural-frictional factors. However, stylized explanations of cyclical unemployment exclusively along the lines of Keynesian, Classical or equilibrium search theory are found inadequate.     

Unemployment, Real Wages and the Money Supply in Australia*

Many observers have attributed the high unemployment experienced in Australia in the 1970s to the rises in real wages which have occurred in the decade. An alternative or additional hypothesis is that unemployment has resulted from policy directed at controlling inflation and that this has been exacerbated by the occurrence of adverse external factors, particularly bul not solely the oil price shocks, which have made inflation more difficult than otherwise to control .
The results of econometric tests suggest that a significant portion of fluctuations in the unemployment rate can be explained by real wage movements, and as well monetary policy through its effects on the real money supply also seems to affect unemployment. Both real wage rises and monetary restrictions appear to have contributed to the jump in unemployment in 1974–75, and since then the continuing high and rising unemployment rate is closely associated with the low growth rate of the real money supply .     

The Probability of Leaving Unemployment: The Influence of Duration,Destination and Demographics*

This paper examines the influences of a number of demographic characteristics and the duration of unemployment on the probability of leaving unemployment. This probability is found to decrease as the duration of unemployment increases, with married females having the highest probability of exit. Various measures of average completed duration suggest that the longest spells of unemployment are incurred by older males. These appear to be longest for males withdrawing from the labour market. The relationship between the duration of unemployment and the probability of exit is important for labour market policy. Some relevant considerations are also explored in the paper.     

Vacancies and Unemployment in Australia

This article examines the extent to which the Mortensen–Pissarides model of labour market search can quantitatively match business cycle fluctuations in Australia. With productivity and job‐separation‐rate shocks, the model fails to produce substantial volatility among unemployment or vacancies, a result similar to Shimer's (2005) findings for the United States. Examining a broader range of shocks significantly increases the magnitude of business cycle fluctuations, but still only explains roughly 25 per cent of labour market volatility. The implied volatility of wages in the model is similar to that in the data and hence excessive wage flexibility is unlikely to be central to the failure of the model as claimed in the literature.     

Youth Unemployment in Australia

This article was prepared by Larry D. Singell, Professor of Economics, University of Colorado, Boulder. In 1982 the author was Visiting Fellow at te University of Melbourne. Profess Singell wishes to thank Dr J. P. Nieuwenhuysen, Dr P. Stricker, and the anonymous referees of the Australian Economic Review for their very useful comments. The autor takes full responsibility for any remaining short-comings.     

Asymmetry and Duration Dependence in Australian GDP and Unemployment

The periodic structure of business cycles suggests that significant asymmetries are present over different phases of the cycle. This paper uses markov regime-switching models with fixed and duration dependent trasition probabilities to directly model expansions, contractions and durations in Australian GDP growth and unemployment growth. Evidence is found of significant asymmetry in growth rates across expansions and contractions for both series. GDP contractions exhibit duration dependence implying that as output recessions age the likelihood of switching into an expansion phase increases. Unemployment growth does not exhibit duration dependence in either phase. Evidence is also presented that non-linearities in unemployment growth are well explained by the asymmetries in the GDP growth cycle. The analysis suggests that recessions are periods of rapid and intense job destruction, that Australian unemployment tends to ratchet up in recessionary periods and, in contrast to US and UK studies, that shocks to Australian unemployment growth are more persistent in recessions than expansions.     

Youth Unemployment In Australia: A Survey

This survey was prepared by Mr P. Stricker and Dr P. Sheehan of the Institute staff. It draws in part on materlal published by these authors in R. F. Henderson (ed), Youth Unemployment, Proceedings of the Second Academy of the Social Sciences Symposium, Canberra, 1977.     

Immigration and Unemployment: New evidence from Australia and New Zealand

This study uses a new Granger no-causality testing procedure developed by Toda &Yamamoto (1995) to contribute to the debate on immigration and unemployment in Australia and New Zealand. It investigates a possible causal linkage between these variables in a six-variable vector autoregression (VAR) model. The research finds no Granger causality between immigration and unemployment. Instead, it finds evidence of Granger causality running from industrial structural changes, measured by the Stoikov and HDB indices, to unemployment, and from several other economic variables to unemployment.     

The Dynamics of Technological Unemployment*

This article compares the short‐ and long‐run effects of technological progress on employment. It presents a simple model of frictional unemployment capturing the negative creative destruction effects of technological change on employment. In the long run, faster technological change accelerates job obsolescence, which reduces the equilibrium level of employment. But it is also shown to have short‐run positive and potentially important effects on employment. This tends to partially reconcile the ‘‘Schumpeterian'’ view of the effects of technological change on labor markets with facts such as the response of most OECD unemployment rates to the 1970s productivity slowdown.     

The Impact of Vocational Training on the Unemployment Duration

In this study, we estimate a semiparametric hazard model to assess the impact of vocational training on the duration of unemployment spells. Our research work is based on the data obtained from the District Labor Office in Słupsk, Poland from 1999 to 2007. We employ matching methods to take into account the potential sample selection problem, i.e., finding an adequate control group for the group of trainees. Therefore, we estimate a random-effects probit model for the likelihood of participation in a training program. The main question of this paper is whether the training significantly raises the transition rate from unemployment to employment in the short and the long run.     

Employment, The Labour Force and Unemployment in Australia: A Disagregegated Approach

This article presents statistical analysis of the distributional aspects of labour market developments in the Australian economy from 1966 to 1985. The focus is on the adjustment of the labour force to changes in employment opportunities. Two sets of data for selected age/sex/marital groups are utilised in the analysis: regressions to test for differences in the sensitivity of labour force participation to employment opportunities and a series of tables documenting population adjusted changes in employment and the labour force. The aggregate relationship between employment changes and labour force changes (and hence changes in unemployment) is explained by the disaggregated data.     

Fewer in Number but Harder to Employ: Incidence and Duration of Unemployment in an Economic Upswing

During an upswing in the Norwegian labour market in the early 1990s, inflow to unemployment fell by one-quarter from October 1991 to October 1993. In contrast, the employment probabilities of the inflow rose much less for males and even decreased for females. A duration analysis showed that the average "employability" of the unemployment inflow declined due to lower previous income, a lower proportion with job experience, a higher proportion with previous unemployment experience, a higher proportion with immigrant background, and a lower proportion on recall. They were fewer in number, but harder to employ.
JEL classification : E 32; J 64     

Investment Spending in Australia: Further Study and Interpretation*

Recent work in macro theory suggests that aggregate 'demand' policies have direct supply-side effects in the short run, if Lucas's standard specification of the nonlinear adjustment costs for capital is generalized In this paper, we estimate an investment equation (involving Tobin's valuation ratio and Australian data) which nests three hypotheses: Lucas's standard specification of adjustment costs, a simple generalization which permits labour to be involved in the installation of capital and a model which allows for liquidity constraints. The results support the suggested alternative formulation of the q-theory     

The Natural Rate of Unemployment in Australia: Estimates From a Structural Var

The concept of the natural rate of unemployment is widely used in the analysis and discussion of macroeconomic policy. It is, however, unobservable so that estimates of the natural rate are necessarily based on a particular theory of unemployment. Hence, measures of the natural rate, whether constant or time-varying, are necessarily model-dependent. Various series based on specific models have recently become available for Australia. We set out to compute a series for the natural rate based on a minimal theoretical structure captured by a two-variable structural vector-autoregressive (SVAR) model estimated using quarterly Australian data for the period 1978–1997. We assess the robustness of our estimates by varying both the theoretical restriction imposed on the model and the two variables included in the model. We find that the computed natural rate is quite sensitive to model specification, both in terms of the level and of the cyclical behaviour of the natural rate. We argue, however, that a particular variant of our model is strongly preferred to the others investigated. It produces an estimates natural rate series the behaviour of which is broadly consistent with that of series produced by others from more restrictive models.     

Immigrant Generation and Income in Australia*

Microdata for adult men from the 1981 Australian Census are used to study the determinants of income by immigrant generation. The overseas born, 30 per cent of adult males, have 5 per cent lower incomes than the native born, and ceteris paribus, 7 per cent lower incomes. Schooling and pre-immigration labour market experience have smaller effects for the overseas born. Among the Australian born, those with overseas-born parents have 4 per cent higher incomes overall, but, ceteris paribus, there is no difference. The means and partial effects of the explanatory variables among the native born are not related to the parents' nativity.