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Essays on labour frictions in interwar Britain

Luzardo-Luna, Ivan (2021) Essays on labour frictions in interwar Britain. PhD thesis, London School of Economics and Political Science.

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Identification Number: 10.21953/lse.00004283


This thesis examines the determinants of the high levels of structural unemployment in interwar Britain by following a `search and matching' approach. After an extensive literature review in Chapter 1, Chapter 2 estimates the matching function of the British labour market for the period 1921-1934. The changes in matching efficiency can explain the high and persistent unemployment observed from the second half of the 1920s onwards, and this was accelerated by the onset of the Great Depression. Early in the 1920s, matching efficiency improved due to the development of the retail industry. However, the econometric results show a structural break in March 1927, related to a major industrial reshuffling that reduced demand for workers in the staple industries. Due to the regional polarisation of the British labour market, spatial mismatching has the potential to explain the high level of unemployment during the interwar years. Chapter 3 uses the regional returns of the Unemployment Insurance administration to estimate the aggregate and regional Beveridge curve shifts with a vector error correction model (VECM). This estimation finds that spatial mismatching and frictions within regions, accounted for 21% and 79% of structural unemployment, respectively. Within the frictions inside the regions, the case of the north of England was particularly important, and this area accounted for 42% of the national labour frictions. Chapter 4 estimates the drivers behind structural unemployment for the counties located in the north of England and Scotland between January 1928 and November 1931, using Arellano-Bond's Generalized Method of Moments estimator for a dynamic panel model. The results find that high labour frictions in the north of England were related to an important increase in the ratio of average paid unemployment benefits to nominal wages in the most populated counties in this region, which also contained a large share of unemployed female workers and suffered a high frequency of temporary stoppages within the unemployed pool.

Item Type: Thesis (PhD)
Additional Information: © 2021 Ivan Luzardo-Luna
Library of Congress subject classification: D History General and Old World > DA Great Britain
H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
Sets: Departments > Economic History
Supervisor: Minns, Chris and Roses, Joan R.

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