An Econometric Analysis of Unemployment in Great Britain, 1952–75

In this paper we shall argue that the main causes of high unemployment m Britain since the mid-sixties, are the level and composition of aggregate demand. We shall argue that structural changes in the economy that have led to a change in the composition of output (from the industrial sector to the services sector) are an important explanation of the high levels of unemployment. Further, we shall argue that the increased unemployment benefits since 1966 do not have a significant effect on the level of unemployment. Our econometric results suggest that although we can highlight the main determinants of unemployment, the relationship is inherently unstable suggesting the need for a more completely specified model of the labour market.