The evolution of excess job reallocation in the U.S

This paper explores the evolution of U.S. excess job reallocation over time from the geographical location perspective. We employ a dynamic latent factor model that decomposes excess job reallocation fluctuations into national, regional and state-specific allocation components. We found that the national allocation component accounted for a sizeable fraction of the excess job reallocation volatility across the states for the period 1977–2009, which is in line with the economic theory prediction proposed by Mortensen (1994) and Campbell and Fisher (2000). Some interesting patterns emerged while we investigated the roles played by the national, regional and state-specific allocation components in driving the evolution of small and large businesses across states. Our results suggest that the national allocation component for smaller businesses (1–99 employees) explains a larger fraction of the excess job reallocation variance than it does for large businesses across regions. In contrast, the regional allocation component contributes to a smaller fraction of the excess job reallocation variance irrespective of the plant size category used. Finally, the state-specific allocation component is the main driving force for large businesses. These findings imply that both national and state allocation factors are an essential constituent in job flow dynamic theories.