GEP Research Paper 99/01

Sectoral mobility in UK labour markets

David Greenaway, Richard Upward and Peter Wright

Published in Oxford Review of Economic Policy , Vol. 16 (2000), pp. 57-75.

Abstract

In this paper we use data on individuals to analyse the movements of labour between sectors in the UK economy over the period 1975-1995. The mobility of factors of production, in this case labour, is a crucial determinant of the flexibility and competitiveness of an economy. The speed with which labour markets adjust to changes in demand - for example due to increased globalisation or technological change - determines the 'cost' of those shocks in terms of lost production and unemployment.

We show that although the UK economy has experienced substantial restructuring in terms of employment over the period in question, annual net flows of labour between sectors are small and are dominated by gross flows. We seek to explain this fact using a matching model of labour mobility, which suggests that in general individuals change sectors for reasons other than restructuring. We test various predictions of the model by estimating transition probabilities as a function of individual and sectoral characteristics.

Issued in March 1999.

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