In the late 1960s both Friedman and Phelps argued that there
existed a "natural" rate of unemployment which could not be reduced
in the long run through an expansion of demand without accelerating
inflation. The co-existence of rising unemployment and spiralling
inflation throughout much of the 1970s was seen as evidence in
support of the propositions of Friedman and Phelps and led to the
conclusion that the natural rate of unemployment had risen and was
continuing to rise. Theoretical support was provided by the development
of job-search theory which attributed the rise in unemployment
to rational, voluntary decisions on the part of the unemployed.
This thesis examines the unemployment experience of New Zealand.
over the period 1960-1981 in the context of the job-search model.
That New Zealand has an unemployment problem is established in Part
One by a comparative study of New Zealand data with that from seven
other industrialized nations. This study also depicts the pattern of
New Zealand's unemployment experience and shows it to be in keeping
with the search model as it is subsequently developed in Part Two.
Our representation of the search model enables us to identify
a number of tests of search in the New Zealand context and these are
conducted in Part Three. Not unexpectedly the empirical analysis is
hindered by the paucity of labour force data in New Zealand.
Although some attempt is made to adjust the data to meet our needs
this is only partially successful and care must therefore be taken
in interpreting the results. In general we find that there is some
evidence for the existence of the phenomenon of search in the New
Zealand labour market but that its contribution to the rise in
unemployment since the mid 1970s is negligible.