Behind the Curve: Econometric Estimation and Sectoral Decomposition of the Japanese Beveridge Curve’s Evolution Around the COVID-19 Pandemic

This paper examines the Japanese Beveridge curve in order to identify a possible structural break prior
to the COVID-19 pandemic. We utilize two levels of analysis to detect a break in the relationship between
unemployment and vacancies and determine its timing and potential causes. First, the relationship for
the period January 2000 - June 2023 is estimated by means of a Vector Error Correction Model. We
detect a structural break in November 2019 and find evidence of change in the relationship between
unemployment and vacancies as early as 2018. Second, we use disaggregated vacancy and
unemployment data to analyze the Beverdige curves for sub-groups at the occupational, industrial, and
contractual levels and carry on an extensive mismatch analysis. We find that services-related industries
and occupations contributed to a relatively larger extent to the break in the curve. Counterfactual
experiments suggest that the decline in vacancies and the increase in unemployment recorded during
the pandemic period were amplified by the break.