IMPACT OF LABOUR MARKET VOLATILITY ON JOB FINDING AND SEPARATION RATES - AN EVIDENCE FROM DEVELOPING COUNTRY

Abstract

Uncertainty in significant macroeconomic variables enhances unemployment. For the past five years in Pakistan, the stagnant growth of the labour market is very well documented. Volatility in inflation, interest rates, GDP and other macroeconomic variables are not showing any optimistic signs, specifically from the late ’80s till 2008. Employing Pakistan’s labour force data from 2005-06 till 2017-18, we endeavour to gauge the impact of labour market volatility on unemployment in Pakistan by estimating the job finding and separation rates. Both JSR and JFR are computed by employing an appropriate non-parametric methodology. So far, there is no literature available in Pakistan that has examined the impact of labour market factors on employment. Hence, the motivation of the study is to investigate and evaluate the long-term implications of labour market factors and their consequences on the supply and demand of labour. Results of the study show that there is a significant and positive realation of education level on both JFR and JSR. A higher job separation rate in a country will lead to a higher unemployment rate. This inference suggests that the job separation rate must be reduced or controlled to reduce the unemployment rate.