Employment Risk, Diversification, and Unemployment
This paper studies determinants of the geographic distribution of unemployment in the United States since 1950. The authors argue that "equilibrium" differences in unemployment among markets are partially supported by corresponding differences in the covariance structure of sectoral demands for labor. When workers are mobile, greater diversification of sectoral demands reduces unemployment. The authors confirm this point using pooled time-series-cross-section data on state unemployment and employment by industry. They also find evidence for nonneutrality of aggregate disturbances based on geographic differences in industrial composition and that permanent changes in the sectoral composition of employment lead to transitory fluctuations in unemployment. Copyright 1991, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 106 (1991)
Issue (Month): 4 (November)
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