The Beveridge curve in Europe: new evidence using national and regional data

Abstract

In this paper, national and regional data on job vacancies and unemployment are combined to estimate the Beveridge curves of five European countries and 60 regions, focusing on the period 1975-2004. The Beveridge curve depicts the empirical negative relationship between job vacancy rate and unemployment rate, and reflects the effciency of the job matching process. Movements along a fixed downward-sloping Beveridge curve are associated with cyclical shocks, while shifts of the curve arise from structural factors that alter the matching effciency between job vacancies and unemployed workers. With the same data I then analyze shifts in the Beveridge curves and determine whether these shifts are due to structural changes affecting the matching effciency, or to cyclical factors. The empirical evidence suggests that changes in labor market institutions, long-term unemployment, as well as cyclical shocks are responsible for outward shifts in European Beveridge curves.