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Labour Reallocation, Relative Prices and Productivity

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  • Shutao Cao
  • Danny Leung

Abstract

This paper documents the rate at which labour flows between industries and between firms within industries using the most recent data available. It examines the determinants of these flows and their relationship with the productivity growth. It is found that the dispersion of industry employment growth rates has been elevated since 2005, and that this increase is not likely to be related to the business cycle. It is also found that changes in real exchange rates and commodity prices can account for a significant part of the employment dispersion across industries, especially since 2005. However, shifts of employment labour between industries have generally not contributed positively to aggregate labour productivity growth. With respect to movements of labour between firms within industries, it is found that the job reallocation rates have fallen steadily over the past decade and a half. Finally, unlike labour flows between industries, excess job reallocation rates within industries are found to be strongly related to multifactor productivity and labour productivity growth at the industry level.

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Bibliographic Info

Paper provided by Bank of Canada in its series Working Papers with number 10-2.

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Length: 47 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:bca:bocawp:10-2

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Keywords: Productivity; Inflation and prices; Labour markets;

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References

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  1. Gu, Wulong & Baldwin, John R., 2004. "Industrial Competition, Shifts in Market Share and Productivity Growth," Economic Analysis (EA) Research Paper Series 2004021e, Statistics Canada, Analytical Studies Branch.
  2. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth. Lessons from Microeconomic Evidence," NBER Chapters, in: New Developments in Productivity Analysis, pages 303-372 National Bureau of Economic Research, Inc.
  3. Katharine G. Abraham & Lawrence F. Katz, 1987. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," NBER Working Papers 1410, National Bureau of Economic Research, Inc.
  4. Pierre-Olivier Gourinchas, 1998. "Exchange Rates and Jobs: What Do We Learn from Job Flows?," NBER Working Papers 6864, National Bureau of Economic Research, Inc.
  5. Alain Paquet & Benoit Robidoux, 1997. "Issues on the Measurement of the Solow Residual and the Testing of its Exogeneity: a Tale of Two Countries," Cahiers de recherche CREFE / CREFE Working Papers 51, CREFE, Université du Québec à Montréal.
  6. David Dupuis & Philippe Marcil, 2008. "The Effects of Recent Relative Price Movements on the Canadian Economy," Bank of Canada Review, Bank of Canada, vol. 2008(Autumn), pages 45-55.
  7. Paquet, Alain & Robidoux, Benoit, 2001. "Issues on the measurement of the Solow residual and the testing of its exogeneity: Evidence for Canada," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 595-612, June.
  8. Rob Valletta & Aisling Cleary, 2008. "Sectoral reallocation and unemployment," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue oct17.
  9. Jan Fagerberg, 2000. "Technological Progress, Structural Change and Productivity Growth: A Comparative Study," Working Papers 5, Centre for Technology, Innovation and Culture, University of Oslo.
  10. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier.
  11. Ravi Balakrishnan, 2008. "Canadian Firm and Job Dynamics," IMF Working Papers 08/31, International Monetary Fund.
  12. Macdonald, Ryan, 2007. "Not Dutch Disease, It's China Syndrome," Insights on the Canadian Economy 2007017e, Statistics Canada, Economic Analysis.
  13. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-93, August.
  14. Daniel Aaronson & Ellen Rissman & Daniel G. Sullivan, 2004. "Can sectoral reallocation explain the jobless recovery?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 36-39.
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