ABSTRACT
Unemployment is important to economists because it indicates under-utilisation of labour and therefore, perhaps, a failure of the economic system to use its scarce resources efficiently. This chapter aims to set up a theoretical framework which is based entirely upon flows and thus generates a dynamic view, albeit a simplified one, of unemployment. Numerous statistical studies have been made of the UV relationship to assess its stability, to disaggregate total unemployment, and to assess the effects of specific policy measures upon the labour market. Use of registered unemployment data means that many non-searchers are included and many searchers are excluded, especially amongst women workers. The distribution of unemployment can be analysed in two stages: first looking at how inflows are distributed across the labour force, and second looking at how different durations of unemployment are distributed across the unemployed. Older workers will have low probabilities of leaving unemployment.
