Sectoral Shifts and Cyclical Unemployment Reconsidered, Issue 3491
National Bureau of Economic Research, 1990 - Rate of return - 41 pages
This paper examines the importance of sectoral reallocation and cyclical unemployment; in the postwar US economy. It develops a new measure of reallocation shocks based on the variance of industry stock market excess returns over time, termed cross section volatility. Data on unemployment and vacancies is used to establish that the cross section volatility series is effective in isolating reallocation shocks. The series is then used to measure the contribution of reallocation shocks to aggregate unemployment and to unemployment; of varying durations. On average, about 40 percent of aggregate unemployment is explained by reallocation, but much of the variance of unemployment through time is better explained by cyclical shocks. Reallocation shocks account; for a relatively larger share of long duration unemployment.
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adjustment aggregate and reallocation aggregate fluctuations aggregate sensitivities aggregate unemployment Angus Deaton Beveridge curve Blanchard and Diamond capital and labor capital in sector column contemporaneous cross section volatility cyclical difference specifications duration classes effect on unemployment effective supplies employment changes employment dispersion employment growth excess returns firms importance of reallocation impulse response functions increase in unemployment independent variable industry level of unemployment level of vacancies Lilien long duration unemployment magnitude market return measure of reallocation money supply Nobuhiro Kiyotaki oil price shocks ordinary least squares peak percentage points price of oil productive capital quarters raise unemployment real business cycle Reallocation shocks account reallocation unemployment regressions relative price response of unemployment section volatility series section volatility shocks share of reallocation shock variables standard deviation standard errors statistically significant suggests Table total unemployment types of shocks unemployment and vacancies unemployment rate vacancies and unemployment variance variance-covariance matrix weeks