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Micro Vs Macro Explanations of Post-War US Unemployment Movements

Author

Listed:
  • Chris Heaton

    () (Department of Economics, Macquarie University)

  • Paul Oslington

    (University of New South Wales)

Abstract

We consider the contribution of sectoral shocks to post-war US unemployment movements in a dynamic factor framework. Whereas previously published estimates of the contribution of sectoral shocks to unemployment relate to a particular theory of unemployment, our approach is sufficiently general to encompass almost any theory. We estimate our model in the frequency domain and use data on unemployment rather than employment or output. Sectoral shocks are found to account for around half the movements in US unemployment. These shocks tend to be of higher frequency than the common shocks and concentrated in the service and manufacturing sectors. Shock frequencies, sectoral patterns and flows provide some clues to the identity of some of the shocks driving unemployment. In some periods, such as the rise in unemployment in the 1970s, common shocks were dominant, but sectoral shocks have been more important in recent years.

Suggested Citation

  • Chris Heaton & Paul Oslington, 2006. "Micro Vs Macro Explanations of Post-War US Unemployment Movements," Research Papers 0604, Macquarie University, Department of Economics.
  • Handle: RePEc:mac:wpaper:0604
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    References listed on IDEAS

    as
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    Cited by:

    1. Heaton, Chris & Solo, Victor, 2012. "Estimation of high-dimensional linear factor models with grouped variables," Journal of Multivariate Analysis, Elsevier, vol. 105(1), pages 348-367.

    More about this item

    Keywords

    Structural Unemployment; Sectoral vs. Aggregate Shocks; Dynamic Factor Analysis;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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