A flow analysis of the link between Irish and British unemployment

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.