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


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.


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.