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Sectoral Shifts and Cyclical Unemployment: A Reconsideration


  • Palley, Thomas I


The debate over the relative importance of sectoral and aggregate shocks in explaining fluctuations in the aggregate unemployment rate has centered on the relationship between unemployment, job vacancies, and the dispersion of sectoral employment growth rates (which proxies for sectoral shocks). This paper examines some possible theoretical relationships between these variables and, after decomposing unemployment into components attributable to sectoral and aggregate shocks, estimates the importance of each. It finds that fluctuations in unemployment are principally caused by aggregate shocks, but sectoral shifts explain a significant, albeit steady, amount of unemployment. Copyright 1992 by Oxford University Press.

Suggested Citation

  • Palley, Thomas I, 1992. "Sectoral Shifts and Cyclical Unemployment: A Reconsideration," Economic Inquiry, Western Economic Association International, vol. 30(1), pages 117-133, January.
  • Handle: RePEc:oup:ecinqu:v:30:y:1992:i:1:p:117-33

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    References listed on IDEAS

    1. Eckbo, B. Espen, 1983. "Horizontal mergers, collusion, and stockholder wealth," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 241-273, April.
    2. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-142, March.
    3. Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 345-356.
    4. Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
    5. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    6. Allen, Bruce T, 1971. "Vertical Integration and Market Foreclosure: The Case of Cement and Concrete," Journal of Law and Economics, University of Chicago Press, vol. 14(1), pages 251-274, April.
    7. Dodd, Peter, 1980. "Merger proposals, management discretion and stockholder wealth," Journal of Financial Economics, Elsevier, vol. 8(2), pages 105-137, June.
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    Cited by:

    1. N. Groenewold & A.J. Hagger, 1997. "The Natural Unemployment Rate in Australia since the Seventies," Economics Discussion / Working Papers 97-24, The University of Western Australia, Department of Economics.
    2. Shu-hen Chiang, 2012. "The sources of metropolitan unemployment fluctuations in the Greater Taipei metropolitan area," Papers in Regional Science, Wiley Blackwell, vol. 91(4), pages 775-793, November.
    3. 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.
    4. Yanggyu Byun & Hae-shin Hwang, 2015. "Sectoral shifts or aggregate shocks? A new test of sectoral shifts hypothesis," Empirical Economics, Springer, vol. 49(2), pages 481-502, September.
    5. repec:rim:rimwps:27-08 is not listed on IDEAS
    6. Frank Barry & Colm Kearney, 2003. "A portfolio analysis of industrial structure," Working Papers 200309, School of Economics, University College Dublin.
    7. N. Groenewold & A.J. Hagger, 1997. "The US natural rate: A "Lilien" time-series, January 1948 to August 1996," Economics Discussion / Working Papers 97-10, The University of Western Australia, Department of Economics.
    8. Chiarini, Bruno & Piselli, Paolo, 2000. "Unemployment, Wage Pressure and Sectoral Shifts: Permanent and Temporary Consequences of Intersectoral Shocks," Journal of Policy Modeling, Elsevier, vol. 22(7), pages 777-799, December.

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