Institute for Research on Labor and Employment

Unemployment is one of the most important problems of Pakistan’s economy. The Study investigates whether the Beveridge Curve- the empirical relationship between vacancy and unemployment rate offers a potential instrument to characterize the unemployment in the considered economy. The present topic become popular among academicians particularly after the seminal work of Nobel laureate Christopher Pissarides “On Vacancies (2010)” and recently it has been realized that such analysis can be helpful for understanding of characteristics of unemployment, however it is debatable whether macroeconomic fluctuations helps to explain the nature of this relationship. The study is the first in its nature that explain the relationship between vacancies and unemployment for a developing country like Pakistan, further the paper introduced two shock variable, unemployment composition pool and cyclical variables to examine if they have any significant impact on long run unemployment rate.