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SECTORAL SHIFTS and CYCLICAL UNEMPLOYMENT: A RECONSIDERATION
Author(s) -
Palley Thomas I.
Publication year - 1992
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1992.tb01539.x
Subject(s) - economics , unemployment , aggregate (composite) , dispersion (optics) , aggregate demand , unemployment rate , full employment , macroeconomics , econometrics , labour economics , monetary policy , materials science , physics , optics , composite material
The debate over the relative importance of sectoral and aggregate shocks in explaining fluctuations in the aggregate unemployment rate has centered on the relationship between unemployment, job vacancies, and the dispersion of sectoral employment growth rates (which proxies for sectoral shocks). This paper examines some possible theoretical relationships between these variables, and, after decomposing unemployment into components attributable to sectoral and aggregate shocks, estimates the importance of each. It finds that fluctuations in unemployment are principally caused by aggregate shocks, but sectoral shifts explain a significant, albeit steady, amount of unemployment.