The Dynamics of Sectoral Labour Adjustment
AbstractThis paper develops an equilibrium search and matching model to jointly study the aggregate, sectoral, and distributional impacts of labour adjustment. The model extends Pissarides (2000) to include multisector production and search and "innovation" from investments that can potentially improve a match's productivity. These extensions deliver two mechanisms for inter-sectoral and intra-sectoral labour reallocation after shocks. First, because workers search simultaneously in multiple sectors, changes in labour market conditions in one sector propagate to impact wages and hiring in the rest of the economy through a reservation wage effect. Second, a positive productivity shock causes firms to invest more resources in innovation. This innovation effect shifts production towards high-skill jobs and amplifies the impact of productivity shocks relative to the baseline model. I show that the model is useful for analyzing labour adjustments caused by a diverse set of factors including: technological change; persistent energy price and exchange rate shocks; and trade liberalization. Finally, because the transition dynamics between steady-states are tractable, the model can be readily applied to the data to study particular labour adjustment episodes.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 1141.
Length: 40 pages
Date of creation: Nov 2007
Date of revision:
Sectoral Labour Reallocation; Search and Matching; Wage Spillovers; Transition Dynamics;
Find related papers by JEL classification:
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
- J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-24 (All new papers)
- NEP-DGE-2007-11-24 (Dynamic General Equilibrium)
- NEP-LAB-2007-11-24 (Labour Economics)
- NEP-MAC-2007-11-24 (Macroeconomics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Wesselbaum, Dennis, 2011.
"Sector-specific productivity shocks in a matching model,"
Elsevier, vol. 28(6), pages 2674-2682.
- Dennis Wesselbaum, 2010. "Sector-Specific Productivity Shocks in a Matching Model," Kiel Working Papers 1585, Kiel Institute for the World Economy.
- G. Gallipoli & G. Pelloni, 2013.
"Macroeconomic Effects of Job Reallocations: A Survey,"
wp897, Dipartimento Scienze Economiche, Universita' di Bologna.
- Giovanni Gallipoli & Gianluigi Pelloni, 2013. "Macroeconomic Effects of Job Reallocations: A Survey," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 5(2), pages 127-176, December.
- Giovanni Gallipoli & Gianluigi Pelloni, 2013. "Macroeconomic Effects of Job Reallocations: A Survey," Working Paper Series 37_13, The Rimini Centre for Economic Analysis.
- Giovanni Gallipoli & Gianluigi Pelloni, 2008. "Aggregate Shocks vs Reallocation Shocks: an Appraisal of the Applied Literature," Working Paper Series 27-08, The Rimini Centre for Economic Analysis, revised Jan 2008.
- Alexiadis, Stilianos & Eleftheriou, Konstantinos & Nijkamp, Peter, 2013. "Technology adoption within a search model: Evidence from OECD countries," Economic Modelling, Elsevier, vol. 33(C), pages 137-148.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Babcock).
If references are entirely missing, you can add them using this form.