Can Sectoral Shifts Generate Persistent Unemployment in Real Business Cycle Models?
AbstractThis paper extends the standard Real Business Cycle model to incorporate sectoral shifts in unemployment. Using relative sectoral technology and sectoral tastes shocks, combined with labor adjustment costs across sectors, we assess the possibility of generating persistent aggregate unemployment. Calibrated to Canadian data, the models suggest that the introduction of sectoral labor mobility with adjustment costs improves the ability of the standard real business cycle model to match the observed persistence in unemployment. Empirically, we estimated a Vector Auto-Regressive model and successfully matched the models' overshooting of labor. The results suggest that government policies aimed to alleviate the unemployment burden should pay closer attention to sectoral phenomena, specifically to sectoral labor mobility.
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Bibliographic InfoPaper provided by EconWPA in its series Macroeconomics with number 0311004.
Date of creation: 11 Nov 2003
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Real Business Cycle (RBC); Sectoral Shocks; Unemployment Persistence; Vector Auto-Regressive (VAR); Blanchard-Quah (B-Q) Identification;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-11-16 (All new papers)
- NEP-DGE-2003-11-16 (Dynamic General Equilibrium)
- NEP-LAB-2003-11-16 (Labour Economics)
- NEP-MAC-2003-11-16 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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