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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.

Suggested Citation

  • Michael H. Riordan & Robert W. Staiger, 1988. "Sectoral Shocks and Structural Unemployment," NBER Working Papers 2522, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2522
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    References listed on IDEAS

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    1. Paul Milgrom & Sharon Oster, 1987. "Job Discrimination, Market Forces, and the Invisibility Hypothesis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(3), pages 453-476.
    2. Harris Milton & Townsend, Robert M, 1981. "Resource Allocation under Asymmetric Information," Econometrica, Econometric Society, vol. 49(1), pages 33-64, January.
    3. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-538, June.
    4. 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, vol. 17(2), pages 339-396.
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    6. Rogerson, Richard, 1987. "An Equilibrium Model of Sectoral Reallocation," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 824-834, August.
    7. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
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    Citations

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    Cited by:

    1. Heaton, Chris & Oslington, Paul, 2010. "Micro vs macro explanations of post-war US unemployment movements," Economics Letters, Elsevier, vol. 106(2), pages 87-91, February.
    2. Feestra, R.C. & Lewis, T.R. & Mcmillan, J., 1989. "Designing Policies To Open Trade," Papers 349, California Davis - Institute of Governmental Affairs.
    3. Sonja Sheikh & Wolfgang Pauer, 1999. "Strukturelle Arbeitslosigkeit in ausgewählten Ländern der Europäischen Union unter besonderer Berücksichtigung der Mismatch-Komponente," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 68(3), pages 424-448.
    4. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 351-380, October.
    5. Robert C. Feenstra & Tracy Lewis & John McMillan, 1990. "Designing Policy To Open Trade," Economics and Politics, Wiley Blackwell, vol. 2(3), pages 223-240, November.
    6. Steven J. Davis & John Haltiwanger, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 819-863.
    7. Magee, Christopher, 2001. "Administered protection for workers: an analysis of the trade adjustment assistance program," Journal of International Economics, Elsevier, vol. 53(1), pages 105-125, February.
    8. Blinder, Alan S, 1988. "The Challenge of High Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 1-15, May.
    9. Arnold, Lutz G., 2002. "On the growth effects of North-South trade: the role of labor market flexibility," Journal of International Economics, Elsevier, vol. 58(2), pages 451-466, December.
    10. Frank Barry & Joe Durkan, 1996. "Team Aer Lingus and Irish Steel: An Application of the Declining High-Wage Industries Literature," Open Access publications 10197/5743, School of Economics, University College Dublin.
    11. Canziani, Patrizia & Petrongolo, Barbara, 2001. "Firing costs and stigma: A theoretical analysis and evidence from microdata," European Economic Review, Elsevier, vol. 45(10), pages 1877-1906, December.
    12. Michael W. Klein & Scott Schuh & Robert K. Triest, 2002. "Job creation, job destruction, and international competition: a literature review," Working Papers 02-7, Federal Reserve Bank of Boston.
    13. 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, vol. 12(4), pages 685-708, December.

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