# 11-159/3 (2011-11-08)

Michael W.L. Elsby, University of Edinburgh, and NBER; Bart Hobijn, FRB San Francisco, and VU University Amsterdam; Aysegul Sahin, FRB New York
Unemployment, Worker flows, Job Finding Rate, Separation Rate
JEL codes:
E24, J6

We provide a set of comparable estimates for the rates of inflow to and outflow fromunemployment using publicly available data for fourteen OECD economies. We thendevise a method to decompose changes in unemployment into contributions accountedfor by changes in inflow and outflow rates for cases where unemployment deviates fromits flow steady state, as it does in many countries. Our decomposition reveals thatfluctuations in both inflow and outflow rates contribute substantially to unemploymentvariation within countries. For Anglo-Saxon economies we find approximately a 15:85inflow/outflow split to unemployment variation, while for Continental European andNordic countries, we observe much closer to a 45:55 split. Using the estimated flowrates we compute gross worker flows into and out of unemployment. In all economieswe observe that increases in inflows lead increases in unemployment, whereas outflows lag a ramp up in unemployment.