Beveridge Curve

A Beveridge curve, or UV-curve, is a graphical representation of the relationship between unemployment and the job vacancy rate (the number of unfilled jobs expressed as a proportion of the labor force). It typically has vacancies on the vertical axis and unemployment on the horizontal. The curve is named after William Beveridge and it is hyperbolic shaped and slopes downwards as a higher rate of unemployment normally occurs with a lower rate of vacancies. If it moves outwards over time, then a given level of vacancies would be associated with higher and higher levels of unemployment, which would imply decreasing efficiency in the labour market. Inefficient labour markets are due to mismatches between available jobs and the unemployed and an immobile labour force.

The position on the curve can indicate the current state of the economy in the business cycle. For example, the recessionary periods are indicated by high unemployment and low vacancies, corresponding to a position on the lower side of the 45 degree line, and likewise high vacancies and low unemployment indicate the expansionary periods, above the 45 degree line.

Read more about Beveridge Curve:  History of The Beveridge Curve, Movements of The Beveridge-curve

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