Dynamics of the Beveridge Curve and Global Crises

This research studies the relation between unemployment and vacancies for Chile between 1994I-2012IV with a special focus on the stages of global crises. Looking at the data, we observed that consequently to the Asian financial crisis, Chile showed an outward shift from the Beveridge Curve which indicates an efficiency loss in the matching process between labor supply and demand. On the other hand, the curve moved inwards as a result of the sub-prime crisis, a proof that supports an improvement in the matching process. We examine a series of factors previously used in the literature with the aim to decompose the changes in the unemployment rate and distinguish the factors that explained the changes in the efficiency of the matching process during both crises. The results, point out that the composition of the labor force and the real wage level were the main variables that explained the efficiency changes.