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Aggregate Shocks vs Reallocation Shocks: an Appraisal of the Applied Literature

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  • Giovanni Gallipoli

    ()
    (University of British Columbia, Canada and The Rimini Centre for Economic Analysis, Italy)

  • Gianluigi Pelloni

    ()
    (University of Bologna, Italy and The Rimini Centre for Economic Analisys - Italy)

Abstract

This paper critically appraises the di erent approaches that have characterized the literature on the macroeconomic e ects of job reallocations from Lilien's seminal work to recent developments rooted in structural general equilibrium models, nonlinear econometric techniques and the concepts of job creation and destruction. Despite a ourishing of empirical analysis no unifying theoretical framework has obtained consensus in the scienti c debate. We face a corpus of research which is heterogeneous in variables' selection and experimental design. This widespread heterogeneity makes the evaluation of results a daunting task. Reliability of outcomes becomes almost impossible to assess when, even within models of the same generation, the lack of a rigorous theoretical background hinders well de ned experimental design and makes comparisons di cult. The strong pace at which the empirical literature on the macroeconomic e ects of job reallocations has been growing in recent years suggests that a general assessment of the state of the art is valuable and maybe indispensable. As a guiding principle for our excursion we track down the methodological development of the proposed solutions to the crucial problem of observational equivalence. We do not linger on speci c econometric methods nor on strictly theoretical issues not relevant to our main purpose. We draw the conclusion that the asymmetric and non-directional nature of allocative shocks, which holds the key to the solution of the problem, is better captured by multivariate, non-linear, dynamic econometric models and numerical simulation techniques. Davis and Haltiwanger's perspective on job creation and destruction seems to us of paramount importance for future research because of its potential to encompass a wealth of micro-level data sets within a rigorous analytical framework.

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Bibliographic Info

Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 27-08.

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Date of creation: Jan 2008
Date of revision: Jan 2008
Handle: RePEc:rim:rimwps:27-08

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Keywords: Sectoral shifts; methodology; measurement; assessment;

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Cited by:
  1. Zinzhu Chen & Prakash Kannan & Prakash Loungani & Bharat Trehan, 2011. "New evidence on cyclical and structural sources of unemployment," Working Paper Series 2011-17, Federal Reserve Bank of San Francisco.
  2. Theodore Panagiotidis & Gianluigi Pelloni, 2007. "Non-Linearity In The Canadian And Us Labour Markets: Univariate And Multivariate Evidence From A Battery Of Tests," Working Paper Series 06-07, The Rimini Centre for Economic Analysis, revised Jul 2007.
  3. Pelloni, Gianluigi & Panagiotidis, Theodore, 2003. "Macroeconomic Effects of Reallocation Shock: A Generalished Impulse Response Function Analysis for Three European Countries," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 18, pages 794-816.
  4. Theodore Panagiotidis & Gianluigi Pelloni, 2013. "Employment Reallocation and Unemployment Revisited: A Quantile Regression Approach," Working Paper Series 01_13, The Rimini Centre for Economic Analysis, revised Feb 2014.
  5. Peter Rodenburg, 2011. "The remarkable transformation of the UV curve in economic theory," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 18(1), pages 125-153.
  6. Francesco Furlanett & Nicolas Groshenny, 2012. "Matching efficiency and business cycle fluctuations," Reserve Bank of New Zealand Discussion Paper Series DP2012/06, Reserve Bank of New Zealand.
  7. T. Panagiotidis & G. Pelloni & W. Polasek, 2003. "Macroeconomic Effects of Reallocation Shocks: A Generalised Impulse Reponse Function Analysis for Three European Countries," Working Papers 505, Dipartimento Scienze Economiche, Universita' di Bologna.

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