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The aggregate effects of long run sectoral reallocation

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  • Reicher, Christopher Phillip

Abstract

In this paper, I estimate a series of long run reallocative shocks to sectoral employment using a stochastic volatility model of sectoral employment growth for the United States from 1960 through 2011. Reallocative shocks (which primarily measure construction and technology busts) have little effect on the natural rate of unemployment or on long run productivity, but there is mild evidence that they are recessionary. A broad class of theoretical models suggests that the contractionary effect of a reallocative shock should come from the direct aggregate effect of the underlying shock and not from human capital mismatch. Looking at the period of the Great Recession, reallocation has had no detectable effect on the natural rate of unemployment and can count for a 0.5% rise in cyclical unemployment from 2007 through the end of 2009 and 0.3% through the beginning of 2011.

Suggested Citation

  • Reicher, Christopher Phillip, 2011. "The aggregate effects of long run sectoral reallocation," Kiel Working Papers 1720, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1720
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    References listed on IDEAS

    as
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    10. Gueorgui Kambourov & Iourii Manovskii, 2008. "Rising Occupational And Industry Mobility In The United States: 1968-97," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 41-79, February.
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    Cited by:

    1. Krzysztof Bartosik, 2013. "Zmiany strukturalne i koniunkturalne a zatrudnienie w polskim przemyśle przetwórczym," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 9, pages 91-115.
    2. Reicher, Christopher Phillip, 2011. "A tale of two countries: A comparison of the aggregate effects of sectoral reallocation in the United States and Germany," Kiel Working Papers 1721, Kiel Institute for the World Economy (IfW Kiel).

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    More about this item

    Keywords

    Mismatch; sectoral shifts; reallocation; natural rate; unemployment; Great Recession; stochastic volatility;
    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
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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