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Sectoral Shifts and Unemployment in Interwar Britain

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  • S. Lael Brainard

Abstract

This paper measures the importance of sectoral shifts, as against aggregate shocks and changes in search intensity, in explaining the persistent high unemployment that prevailed in interwar Britain. It develops a new measure of sectoral shifts that captures the arrival of information about reallocation shocks by using the cross-section variation in sectoral stock market excess returns over time. The cross-section variation series accounts for roughly one-quarter of the average level of aggregate unemployment during the interwar period, even after controlling for a variety of shocks to aggregate demand, and for roughly one-half of the variation in unemployment, suggesting an important role for sectoral shifts.

Suggested Citation

  • S. Lael Brainard, 1992. "Sectoral Shifts and Unemployment in Interwar Britain," NBER Working Papers 3980, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3980
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    References listed on IDEAS

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    1. Collins, Michael, 1982. "Unemployment in Interwar Britain: Still Searching for an Explanation [Searching for an Explanation of Unemployment in Interwar Britain]," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 369-379, April.
    2. Davis, Steven J., 1987. "Fluctuations in the pace of labor reallocation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 27(1), pages 335-402, January.
    3. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-793, August.
    4. Prakash Loungani & Mark Rush, 1990. "Sectoral shifts in interwar Britain," Working Paper Series, Macroeconomic Issues 90-7, Federal Reserve Bank of Chicago.
    5. Cross, Rodney, 1982. "How Much Voluntary Unemployment in Interwar Britain? [Searching for an Explanation of Unemployment in Interwar Britain]," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 380-385, April.
    6. Brunner, Karl & Meltzer, Allan H., 1987. "Empirical studies of velocity, real exchange rates, unemployment, and productivity," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 27(1), pages 1-8, January.
    7. Loungani, Prakash & Rush, Mark & Tave, William, 1990. "Stock market dispersion and unemployment," Journal of Monetary Economics, Elsevier, vol. 25(3), pages 367-388, June.
    8. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
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    Cited by:

    1. Jinzhu Chen & Prakash Kannan & Prakash Loungani & Bharat Trehan, 2012. "New evidence on cyclical and structural sources of unemployment," Proceedings, Federal Reserve Bank of San Francisco, issue March, pages 1-23.
    2. Giovanni Gallipoli & Gianluigi Pelloni, 2013. "Macroeconomic Effects of Job Reallocations: A Survey," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 5(2), pages 127-176, December.
    3. Kimberly A. Berg & Nam T. Vu, 2021. "Asymmetric effects of sectoral shifts under low and high uncertainty," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1149-1171, July.

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