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Jobless Recovery and Structural Change: A VAR Approach

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  • Li-Hsueh Chen
  • Zhen Cui

Abstract

This study uses a vector autoregression approach to examine the link between jobless recoveries and the fast employment expansion in finance, health and education (FHE) sectors. Both reduced-form estimates and impulse responses indicate a negative effect of the expansion on aggregate employment. While the expansion Granger causes aggregate employment fluctuations, up to 40 per cent of the error variance of those fluctuations can be explained by innovations in the expansion. Moreover, movements in aggregate employment are reduced by 25 per cent when the expansion is accounted for. Therefore, the fast expansion of the FHE sectors is shown to have notably contributed to the onset of jobless recoveries. JEL Classification: E24, E32, C32

Suggested Citation

  • Li-Hsueh Chen & Zhen Cui, 2017. "Jobless Recovery and Structural Change: A VAR Approach," South Asian Journal of Macroeconomics and Public Finance, , vol. 6(1), pages 1-26, June.
    • Handle: RePEc:sae:smppub:v:6:y:2017:i:1:p:1-26
    DOI: 10.1177/2277978717695145
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    References listed on IDEAS

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    Cited by:

    1. Korkut Alp Erturk & Ivan Mendieta-Munoz, 2018. "The changing dynamics of short-run output adjustment," Working Paper Series, Department of Economics, University of Utah 2018_04, University of Utah, Department of Economics.

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    More about this item

    Keywords

    Jobless recovery; structural change; sectoral shift; VAR;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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