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Unemployment and Vacancies with Sectoral Shifts

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  • Hosios, Arthur J

Abstract

Recent analyses of unemployment-vacancy series suggest that aggregate shocks, rather than sectoral shocks, are the primary factors responsible for unemployment fluctuations. This inference follows from two widely held beliefs: sectoral shocks induce only positive unemployment-vacancy comovements, while negative comovements are necessarily the result of aggregate demand shocks. This paper describes an equilibrium matching model that identifies plausible circumstances in which neither assumption is correct, thus suggesting that unemployment-vacancy data are inconclusive. Interestingly, this model's novel results are due to standard features in the contracting literature: firms experience relative price shocks and negotiate contracts that prescribe temporary layoffs. Copyright 1994 by American Economic Association.

Suggested Citation

  • Hosios, Arthur J, 1994. "Unemployment and Vacancies with Sectoral Shifts," American Economic Review, American Economic Association, vol. 84(1), pages 124-144, March.
  • Handle: RePEc:aea:aecrev:v:84:y:1994:i:1:p:124-44
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    References listed on IDEAS

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    1. Coppinger, Vicki M & Smith, Vernon L & Titus, Jon A, 1980. "Incentives and Behavior in English, Dutch and Sealed-Bid Auctions," Economic Inquiry, Western Economic Association International, vol. 18(1), pages 1-22, January.
    2. Brookshire, David S & Coursey, Don L, 1987. "Measuring the Value of a Public Good: An Empirical Comparison of Elicitation Procedures," American Economic Review, American Economic Association, pages 554-566.
    3. Don Coursey, 1987. "Markets and the measurement of value," Public Choice, Springer, vol. 55(3), pages 291-297, October.
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    Cited by:

    1. Francesco Furlanetto & Nicolas Groshenny, 2016. "Mismatch Shocks and Unemployment During the Great Recession," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(7), pages 1197-1214, November.
    2. Shigeru Fujita, 2011. "Dynamics of worker flows and vacancies: evidence from the sign restriction approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(1), pages 89-121, January/F.
    3. Francesco Furlanetto & Nicolas Groshenny, 2012. "Matching efficiency and business cycle fluctuations," Working Paper 2012/07, Norges Bank.
    4. Storer, Paul, 1996. "Separating the effects of aggregate and sectoral shocks with estimates from a Markov-switching search model," Journal of Economic Dynamics and Control, Elsevier, vol. 20(1-3), pages 93-121.
    5. Hairault, Jean-Olivier & Zhutova, Anastasia, 2014. "The Cyclicality of Labor Market Flows: A Multiple-Shock Approach," IZA Discussion Papers 8558, Institute for the Study of Labor (IZA).
    6. Lu, Jing, 1996. "A reconsideration of the interindustry employment dispersion," Economics Letters, Elsevier, vol. 53(2), pages 203-208, November.
    7. John Haltiwanger & Steven J. Davis, 1999. "On the Driving Forces behind Cyclical Movements in Employment and Job Reallocation," American Economic Review, American Economic Association, pages 1234-1258.
    8. Furlanetto, Francesco & Groshenny, Nicolas, 2016. "Reallocation shocks, persistence and nominal rigidities," Economics Letters, Elsevier, vol. 141(C), pages 151-155.
    9. Alejandro Justiniano & Claudio Michelacci, 2012. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies in the United States and Europe," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 8(1), pages 169-235.
    10. Alejandro Justiniano & Claudio Michelacci, 2011. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies in the US and Europe," NBER Working Papers 17429, National Bureau of Economic Research, Inc.
    11. repec:rim:rimwps:27-08 is not listed on IDEAS
    12. Joel Sobel, 2006. "For Better or Forever: Formal versus Informal Enforcement," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 271-298, April.
    13. 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, pages 125-153.
    14. repec:eee:labchp:v:3:y:1999:i:pb:p:2711-2805 is not listed on IDEAS
    15. 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.
    16. Jon Strand, 1996. "Employment and wages with sector-specific shocks and worker moral hazard," Journal of Economics, Springer, vol. 63(2), pages 151-173, June.
    17. Phelan, Christopher & Trejos, Alberto, 2000. "The aggregate effects of sectoral reallocations," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 249-268, April.
    18. Jorgensen, Bjorn & Li, Jing & Sadka, Gil, 2012. "Earnings dispersion and aggregate stock returns," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 1-20.

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