IDEAS home Printed from https://ideas.repec.org/p/fip/fedpwp/03-18.html
   My bibliography  Save this paper

Postwar period changes in employment volatility: new evidence from state/industry panel data

Author

Listed:
  • Keith Sill

    (Federal Reserve Bank of Atlanta)

  • Gerald A. Carlino
  • Robert H. DeFina

Abstract

Many recent studies have identified a decline in the volatility of U.S. real output over the last half century. This study examines a less discussed and analyzed trend, but one as significant as the drop in output volatility, namely a substantial decline in employment volatility during the postwar period. Using a new panel data set covering industry employment by state since 1952, the authors find that a large decline in employment growth volatility began in the early 1950s and largely ended by the mid- to late 1960s. This study also illuminates the geographical dimension of the declines, an aspect that has heretofore been unexamined. The data indicate that all states have shared in the volatility decline, although the magnitudes have differed. ; A pooled cross-section/time-series model indicates that fluctuations in tate specific (state level differences in demographic and industrial composition) and macro variables (e.g., changes in monetary policy regimes) have each played a potentially substantial role in explaining volatility trends. The authors find that state-specific forces account for between 1 percent and 24 percent of the variations in employment volatility across time and space. Macro variables account for between 30 percent and 76 percent of the movements in employment volatility, a range broadly consistent with the findings of Stock and Watson (2002). An important finding of this study is that \\"unknown forms of good luck,\\" in the form of smaller shocks to employment, account for between 1 percent and 10 percent of the observed fluctuations. This latter finding suggests a reduced role for unknown forms of good luck in describing the postwar decline in volatility compared to the findings in Stock and Watson's (2002) analysis of the variance of real output growth.

Suggested Citation

  • Keith Sill & Gerald A. Carlino & Robert H. DeFina, 2003. "Postwar period changes in employment volatility: new evidence from state/industry panel data," Working Papers 03-18, Federal Reserve Bank of Philadelphia, revised 2003.
  • Handle: RePEc:fip:fedpwp:03-18
    as

    Download full text from publisher

    File URL: http://www.philadelphiafed.org/research-and-data/publications/working-papers/2003/wp03-18.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
    2. James H. Stock & Mark W. Watson, 2003. "Has the Business Cycle Changed and Why?," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 159-230, National Bureau of Economic Research, Inc.
    3. David Romer & Christina D. Romer, 2002. "The evolution of economic understanding and postwar stabilization policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 11-78.
    4. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
    5. Hess, Gregory D & Iwata, Shigeru, 1997. "Measuring and Comparing Business-Cycle Features," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(4), pages 432-444, October.
    6. Attaran, Mohsen, 1986. "Industrial Diversity and Economic Performance in U.S. Areas," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 20(2), pages 44-54, July.
    7. John R. Kort, 1981. "Regional Economic Instability and Industrial Diversification in the U.S," Land Economics, University of Wisconsin Press, vol. 57(4), pages 596-608.
    8. Hooker, Mark A., 1996. "What happened to the oil price-macroeconomy relationship?," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 195-213, October.
    9. Chang-Jin Kim & Charles R. Nelson, 1999. "Has The U.S. Economy Become More Stable? A Bayesian Approach Based On A Markov-Switching Model Of The Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 608-616, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gerald A. Carlino & Robert Defina & Keith Sill, 2013. "The Long and Large Decline in State Employment Growth Volatility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(2-3), pages 521-534, March.
    2. Keith Sill, 2004. "What accounts for the postwar decline in economic volatility?," Business Review, Federal Reserve Bank of Philadelphia, issue q1, pages 23-31.
    3. Colm Kearney & Frank Barry, 2005. "MNEs and Industrial Structure in Host Countries:A Mean Variance Analysis of Ireland’s Manufacturing Sector," The Institute for International Integration Studies Discussion Paper Series iiisdp023, IIIS.
    4. Claudia M. Buch & Martin Schlotter, 2008. "Regional Origins of Employment Volatility: Evidence from German States," CESifo Working Paper Series 2296, CESifo Group Munich.
    5. Claudia Buch & Martin Schlotter, 2013. "Regional origins of employment volatility: evidence from German states," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(1), pages 1-19, February.
    6. Strotmann, Harald & Döpke, Jörg & Buch, Claudia M., 2006. "Does trade openness increase firm-level volatility?," Discussion Paper Series 1: Economic Studies 2006,40, Deutsche Bundesbank.
    7. M. Alper Çenesiz & Christian Pierdzioch, 2010. "Capital mobility and labor market volatility," International Economics and Economic Policy, Springer, vol. 7(4), pages 391-409, December.
    8. Ben Salha, Ousama, 2013. "Does economic globalization affect the level and volatility of labor demand by skill? New insights from the Tunisian manufacturing industries," Economic Systems, Elsevier, vol. 37(4), pages 572-597.

    More about this item

    Keywords

    Employment (Economic theory);

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedpwp:03-18. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Beth Paul). General contact details of provider: http://edirc.repec.org/data/frbphus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.