IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/1410.html
   My bibliography  Save this paper

Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?

Author

Listed:
  • Katharine G. Abraham
  • Lawrence F. Katz

Abstract

Recent work by David Lilien has argued that the existence of a strong positive correlation between the dispersion of employment growth rates across sectors (G) and the unemployment rate implies that shifts in demand from some sectors to others are responsible for a substantial fraction of cyclical variation in unemployment. This paper demonstrates that, under certain empirically satisfied conditions, aggregate demand movements alone can produce a positive correlation between G and the unemployment rate. Two tests are developed which permit one to distinquish between a pure sectoral shift interpretation and a pure aggregate demand interpretation of this positive correlation. The finding that G and the volume of help wanted advertising are negatively related and the finding that G is directly associated with the change in unemployment rather than with the level of unemployment both support an aggregate demand interpretation. A proxy for sectoral shifts that is purged of the influence of aggregate demand is then developed. Models which allow sectoral shifts in the composition of demand and fluctuations in the aggregate level of demand to affect the unemployment rate independently are estimated using this proxy. The results support the view that pure sectoral shifts have not been an important source of cyclical fluctuations in unemployment.

Suggested Citation

  • Katharine G. Abraham & Lawrence F. Katz, 1984. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," NBER Working Papers 1410, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:1410
    Note: LS
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w1410.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Rosen, Sherwin, 1983. "Unemployment and insurance," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 19(1), pages 5-49, January.
    2. Barro, Robert J, 1977. "Unanticipated Money Growth and Unemployment in the United States," American Economic Review, American Economic Association, vol. 67(2), pages 101-115, March.
    3. Robert J. Barro & Mark Rush, 1980. "Unanticipated Money and Economic Activity," NBER Chapters, in: Rational Expectations and Economic Policy, pages 23-73, National Bureau of Economic Research, Inc.
    4. Barro, Robert J, 1984. "Rational Expectations and Macroeconomics in 1984," American Economic Review, American Economic Association, vol. 74(2), pages 179-182, May.
    5. Charles Holt & Martin David, 1966. "The Concept of Job Vacancies in a Dynamic Theory of the Labor Market," NBER Chapters, in: The Measurement and Interpretation of Job Vacancies, pages 73-110, National Bureau of Economic Research, Inc.
    6. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    7. Stanley Fischer, 1980. "Rational Expectations and Economic Policy," NBER Books, National Bureau of Economic Research, Inc, number fisc80-1, March.
    8. Jackman, R & Layard, Richard & Pissarides, C, 1989. "On Vacancies," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(4), pages 377-394, November.
    9. Abraham, Katharine G, 1983. "Structural-Frictional vs. Deficient Demand Unemployment: Some New Evidence," American Economic Review, American Economic Association, vol. 73(4), pages 708-724, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bordo, Michael D., 1986. "Explorations in monetary history: A survey of the literature," Explorations in Economic History, Elsevier, vol. 23(4), pages 339-415, October.
    2. Hakkio, Craig S. & Rush, Mark & Schmidt, Timothy J., 1996. "The marginal income tax rate schedule from 1930 to 1990," Journal of Monetary Economics, Elsevier, vol. 38(1), pages 117-138, August.
    3. Charles W. Bischoff & Steven C. Hine, 1992. "A Test of Fischer's Theory of Monetary Misperceptions and the Business Cycle in the Presence of Long-Term Contracts," Eastern Economic Journal, Eastern Economic Association, vol. 18(1), pages 99-110, Winter.
    4. Gonzalo Jesús & Taamouti Abderrahim, 2017. "The reaction of stock market returns to unemployment," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 21(4), pages 1-20, September.
    5. Lévesque, Suzanne & Paquin, Lloyd, 1986. "Les microfondements de la macroéconomique : une recension critique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 62(4), pages 597-619, décembre.
    6. John B. Taylor, 1982. "The role of expectations in the choice of monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 47-95.
    7. Duo Qin, 2010. "Modelling of the Inflation-Unemployment Tradeoff from the Perspective of the History of Econometrics," Working Papers 661, Queen Mary University of London, School of Economics and Finance.
    8. Kevin D. Hoover & Òscar Jordà, 2001. "Measuring systematic monetary policy," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 113-144.
    9. W D A Bryant, 2009. "General Equilibrium:Theory and Evidence," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 6875, October.
    10. Gonzalo, Jesús & Taamouti, Abderrahim, 2011. "The reaction of stock market returns to anticipated unemployment," UC3M Working papers. Economics we1145, Universidad Carlos III de Madrid. Departamento de Economía.
    11. Landon, Stuart, 1995. "Testing aggregate neutrality with heterogeneous sectors," Journal of Macroeconomics, Elsevier, vol. 17(1), pages 131-148.
    12. Kevin D. Hoover & Òscar Jordà, 2001. "Measuring systematic monetary policy," Review, Federal Reserve Bank of St. Louis, vol. 83(Jul), pages 113-144.
    13. Sean Becketti, 1983. "The Persistence of Nominal Shocks in a Particular Equilibrium Model," UCLA Economics Working Papers 312, UCLA Department of Economics.
    14. Rodenburg, Peter, 2007. "The Remarkable Place of the UV-Curve in Economic Theory," MPRA Paper 5823, University Library of Munich, Germany.
    15. Aurélien Goutsmedt, 2017. "Stagflation and the crossroad in macroeconomics: the struggle between structural and New Classical macroeconometrics," Documents de travail du Centre d'Economie de la Sorbonne 17043, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    16. Annalisa Lucarelli, 2011. "Vacancies and Hirings: Preliminary Evidence from a Survey on Italian Employers," Rivista di statistica ufficiale, ISTAT - Italian National Institute of Statistics - (Rome, ITALY), vol. 13(2-3), pages 21-53.
    17. Farm, Ante, 2000. "Job Openings, Hirings, and Unmet Demand: A New Approach to the Matching Function and the Beveridge Curve," Working Paper Series 8/2000, Stockholm University, Swedish Institute for Social Research.
    18. W. A. Razzak, 2016. "New Zealand Labor Market Dynamics: Pre- and Post-global Financial Crisis," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 12(1), pages 49-79, September.
    19. Antonio Aznar & Mª Teresa Aparicio & Francisco Javier Trivez, 1991. "Modelo LSW versus modelo NRH-GAP, aplicación de una nueva metodología de selección de modelos," Investigaciones Economicas, Fundación SEPI, vol. 15(3), pages 575-599, September.
    20. Aurélien Goutsmedt, 2017. "Stagflation and the crossroad in macroeconomics: the struggle between structural and New Classical macroeconometrics," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01625188, HAL.

    More about this item

    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:nbr:nberwo:1410. 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: . General contact details of provider: https://edirc.repec.org/data/nberrus.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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    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.