Working Papers

2005-25 | December 2005

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Why Has the U.S. Beveridge Curve Shifted Back? New Evidence Using Regional Data

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The Beveridge curve depicts the empirical relationship between job vacancies and unemployment, which in turn reflects the underlying efficiency of the job matching process. Previous analyses of the Beveridge curve suggested deterioration in match efficiency during the 1970s and early 1980s, followed by improved match efficiency beginning in the late 1980s. This paper combines aggregate and regional data on job vacancies and unemployment to estimate the U.S. aggregate and regional Beveridge curves, focusing on the period 1976-2005. Using new data on job vacancies from the U.S. Bureau of Labor Statistics, the help-wanted advertising series that formed the basis of past work are modified to form synthetic job vacancy series at the national and regional level. The results suggest that a decline in the dispersion of employment growth across geographic areas contributed to a pronounced inward shift in the Beveridge curve since the late 1980s, reversing the earlier pattern identified by Abraham (1987) and reinforcing findings of favorable labor market trends in the 1990s (e.g., Katz and Krueger 1999).

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