Unemployment inflows and outflows in the UK: a micro economometric analysis

Abstract

The unemployment rate is a function of both the inflows to unemployment and the outflows from unemployment. Understanding the unemployment rate requires an understanding of the flows that drive the rate. This thesis contributes to the literature by using micro economic data to look carefully at a selection of factors that affect the heterogeneity of flows into and out of unemployment. In particular, I examine (i) how balance sheet factors affect decisions to reduce employment and other operating costs following a revenue shock; (ii) how unionisation affects redundancies and other involuntary job endings with particular attention to the interaction between unionisation and tenure; and (iii) how local labour demand conditions affects the duration of individual unemployment spells. I find that (i) the state of a firms balance sheet is not related to how it cuts employment numbers and operating costs; (ii) unionised firms have lower redundancy rates for low tenure employees; and (iii) unemployment durations are not affected by a lack of local labour demand.