Sectoral Shocks and Structural Unemployment
When current employers have more information about worker quality than do potential employers, sectoral shocks cause structural unemployment. That is, some workers laid off from an injured sector remain unemployed despite the fact that they are of sufficient quality to be productively employed in an expanding sector at the prevailing wage. Moreover, sectoral unemployment rates are not monotonic in the severity of sectoral shocks due to the 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. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Volume (Year): 34 (1993)
Issue (Month): 3 (August)
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References listed on IDEAS
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- Paul R. Milgrom, 1984.
"Job Discrimination, Market Forces and the Invisibility Hypothesis,"
Cowles Foundation Discussion Papers
708R, Cowles Foundation for Research in Economics, Yale University, revised 1985.
- Paul Milgrom & Sharon Oster, 1987. "Job Discrimination, Market Forces, and the Invisibility Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 102(3), pages 453-476.
- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
- Rogerson, Richard, 1987. "An Equilibrium Model of Sectoral Reallocation," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 824-34, August.
- 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 526-38, June.
- Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-93, August.
- 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.
- Harris Milton & Townsend, Robert M, 1981. "Resource Allocation under Asymmetric Information," Econometrica, Econometric Society, vol. 49(1), pages 33-64, January.
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