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.
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Volume (Year): 34 (1993)
Issue (Month): 3 (August)
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References listed on IDEAS
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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- Harris Milton & Townsend, Robert M, 1981. "Resource Allocation under Asymmetric Information," Econometrica, Econometric Society, vol. 49(1), pages 33-64, January.
- 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.
- 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. Full references (including those not matched with items on IDEAS)