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Sectoral Shifts, Labor Market Sorting, and Aggregate Fluctuations

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  • Williamson, Stephen D

Abstract

A model of sectoral reallocation is constructed where intersectoral friction is not caused by search or mobility costs. Instead, a sectoral disturbance has a negative effect on production possibilities because it reduces the value of previous sorting in the labor market. In equilibrium, a measure of sectoral dispersion is positively correlated with the unemployment rate. An increase in the incidence of sectoral disturbances increases unemployment at cyclical peaks and at cyclical troughs. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Williamson, Stephen D, 1990. "Sectoral Shifts, Labor Market Sorting, and Aggregate Fluctuations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(4), pages 935-952, November.
    • Handle: RePEc:ier:iecrev:v:31:y:1990:i:4:p:935-52
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    Cited by:

    1. Shin, Kwanho, 1997. "Sectoral shocks and movement costs: Effects on employment and welfare," Journal of Economic Dynamics and Control, Elsevier, vol. 21(2-3), pages 449-471.
    2. James J. Chrisman & Esra Memili & Kaustav Misra, 2014. "Nonfamily Managers, Family Firms, and the Winner's Curse: The Influence of Noneconomic Goals and Bounded Rationality," Entrepreneurship Theory and Practice, , vol. 38(5), pages 1-25, September.
    3. Richard Rogerson, 2005. "Sectoral Shocks, Specific Human Capital and Displaced Workers," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 89-105, January.

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