A Flow Analysis of the Link between Irish and British Unemployment
JEL Classification J10 and J60
Michael J. Harrison and Patrick P. Walsh
Department of Economics, Trinity College, Dublin 2, Ireland and European
Bureau of Economic Research
Abstract
This paper is a contribution to the research on Irish
unemployment which for the first time models the flows into and out of the Live
Register. Using the quarterly flow data contructed by the authors (see A Flow
Analysis of the Irish Live Register,Economic and Social Review, Volume 26,
pp. 45-58, 1994), the analysis proceeds within a small open labour market
framework, making use of the concepts of cointegrations and error-correction to
model the flows and hence the migratory movements between Ireland and Britain.
We outline the advantages of using flow data to link unemployment in a small
region and a large region within an integrated labour market. We show that
demographic changes resulting from natural increases in population and migration
anre likely to be the key determinants of unemployment turnover in Ireland. We
conclude that any explanation of Irish unemployment must account for these
special features of the economy, and in particular must indicate why domestic
employment movements seem to have had so little effect on the unemployment
flows.
Acknowledgements
Research for this paper was funded by the Arts and
Social Sciences Benefaction Fund in Trinity College Dublin. Different aspects of
the paper were presented to a workshop at the University of Warsaw in January
1994, to the Dublin Economics Workshop in February 1994, to a workshop on
European Economic Performance held in Trinity College Dublin in April 1994 and
to the Irish Economic Assosiation in May 1994. We thank all who participated in
these meetings for their comments. Special thanks are due to Sandra McNally and
Eric Strobl for research assistance and to Hartmut Lehmann for making his
British flow data available.