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Sectoral Shocks and Structural Unemployment

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  • Michael H. Riordan
  • Robert W. Staiger

Abstract

When current employers rave more information about worker quality than to potential employers, sectoral shocks cause structural unemployment. That is, some workers laid off from an injured sector remain unemployed despite the fact that trey are of sufficient quality to be productively employed in an expanding sector at toe prevailing wage, Moreover, sectoral unemployment rates are not monotonic in one severity of sectoral shocks due to one interaction of layoff activity and hiring activity. Finally, equilibrium employment decisions are not constrained Pareto efficient, and can be improved by a policy of adjustment assistance.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2522.

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Date of creation: Feb 1988
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Publication status: published as International Economic Review, vol. 34, no. 3, August 1993
Handle: RePEc:nbr:nberwo:2522

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  1. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(4), pages 777-93, August.
  2. Milgrom, Paul & Oster, Sharon, 1987. "Job Discrimination, Market Forces, and the Invisibility Hypothesis," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 102(3), pages 453-76, August.
  3. Lawrence H. Summers, 1986. "Why is the Unemployment Rate So Very High near Full Employment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, Economic Studies Program, The Brookings Institution, vol. 17(2), pages 339-396.
  4. Rogerson, Richard, 1987. "An Equilibrium Model of Sectoral Reallocation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(4), pages 824-34, August.
  5. Harris Milton & Townsend, Robert M, 1981. "Resource Allocation under Asymmetric Information," Econometrica, Econometric Society, Econometric Society, vol. 49(1), pages 33-64, January.
  6. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 88(3), pages 526-38, June.
  7. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 84(3), pages 488-500, August.
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Cited by:
  1. Canziani, Patrizia & Petrongolo, Barbara, 2001. "Firing costs and stigma: A theoretical analysis and evidence from microdata," European Economic Review, Elsevier, Elsevier, vol. 45(10), pages 1877-1906, December.
  2. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 9(4), pages 351-80, October.
  3. Chris Heaton & Paul Oslington, 2006. "Micro Vs Macro Explanations of Post-War US Unemployment Movements," Research Papers, Macquarie University, Department of Economics 0604, Macquarie University, Department of Economics.
  4. Gray, David, 1996. "How unemployable are displaced manufacturing workers?: An analysis of adjustment costs and supplemental adjustment assistance benefits in France," European Journal of Political Economy, Elsevier, Elsevier, vol. 12(4), pages 685-708, December.
  5. Magee, Christopher, 2001. "Administered protection for workers: an analysis of the trade adjustment assistance program," Journal of International Economics, Elsevier, Elsevier, vol. 53(1), pages 105-125, February.
  6. Feestra, R.C. & Lewis, T.R. & Mcmillan, J., 1989. "Designing Policies To Open Trade," Papers, California Davis - Institute of Governmental Affairs 349, California Davis - Institute of Governmental Affairs.
  7. Michael W. Klein & Scott Schuh & Robert K. Triest, 2002. "Job creation, job destruction, and international competition: a literature review," Working Papers, Federal Reserve Bank of Boston 02-7, Federal Reserve Bank of Boston.
  8. Alan S. Blinder, 1988. "The Challenge of High Unemployment," NBER Working Papers, National Bureau of Economic Research, Inc 2489, National Bureau of Economic Research, Inc.
  9. Arnold, Lutz G., 2002. "On the growth effects of North-South trade: the role of labor market flexibility," Journal of International Economics, Elsevier, Elsevier, vol. 58(2), pages 451-466, December.

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