Panel Data Analysis of the Beveridge Curve: Is There a Macroeconomic Relation between the Rate of Unemployment and the Vacancy Rate?

This study investigates whether the Beveridge curve--the relation between vacancy and unemployment rate--is helpful for the quantification of structural unemployment. Since aggregate time series are too short to test detailed hypotheses about the Beveridge curve, the author assembles a panel of nine regions in West Germany. Analyses of these data produce little support for a structural macroeconomic interpretation of the Beveridge curve. The observed shifts of the Beveridge curve are too sudden to be explained by structural changes; there is evidence for aggregation bias; and variables associated with structural unemployment do not substitute for the explanatory power of dummy variables for the observed shifts while cyclical variables do so. Copyright 1991 by The London School of Economics and Political Science.