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Evolving Beveridge Curve Dynamics

Author

Listed:
  • Michael Ellington

    (Management School, University of Liverpool, Liverpool L697ZH UK)

  • Chris Martin

    (Department of Economics, University of Bath, Bath BA27AY UK)

  • Bingsong Wang

    (School of Economics, University of Sheffield, Sheffield S1 4DT, UK)

Abstract

We estimate a Bayesian time-varying parameter VAR model to study evolving Beveridge Curve dynamics for the US for 1965-2022. This allows us to test the empirical relevance of different shocks in driving the Beveridge Curve dynamics, as proposed in theoretical literature. We show that demand and wage shocks play an important role in generating movements in unemployment and vacancies, in addition to the productivity and job destruction shocks that are the main focus of the existing literature. We show that the importance of different shocks has varied over time: the productivity shock is dominant from the 1960s to the mid-1990s, but thereafter the wage shock is equally important. And we show that changes in the slope of the aggregate Beveridge Curve reflect changes in the contributions of the different shocks that drive it, so part of the flattening of the aggregate Beveridge Curve in recent years reflects the growing importance of wage shocks.

Suggested Citation

  • Michael Ellington & Chris Martin & Bingsong Wang, 2024. "Evolving Beveridge Curve Dynamics," Working Papers 2024007, The University of Sheffield, Department of Economics.
    • Handle: RePEc:shf:wpaper:2024007
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    File URL: https://www.sheffield.ac.uk/economics/research/serps
    File Function: First version, September 2024
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    More about this item

    Keywords

    time-varying parameter model; Beveridge Curve; unemployment; vacancies; US labour market;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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