Sectoral Shifts and Unemployment in Interwar Britain
This paper measures the importance of sectoral shifts, as against aggregate shocks and changes in search intensity, in explaining the persistent high unemployment that prevailed in interwar Britain. It develops a new measure of sectoral shifts that captures the arrival of information about reallocation shocks by using the cross-section variation in sectoral stock market excess returns over time. The cross-section variation series accounts for roughly one-quarter of the average level of aggregate unemployment during the interwar period, even after controlling for a variety of shocks to aggregate demand, and for roughly one-half of the variation in unemployment, suggesting an important role for sectoral shifts.
|Date of creation:||Jan 1992|
|Date of revision:|
|Publication status:||published as With David M. Cutler, published as "Sectoral Shifts and Cyclical Unemployment Reconsidered", Quarterly Journal of Economics, Vol. 108, no. 1 , (1993): 219-243.|
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- Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
- Collins, Michael, 1982. "Unemployment in Interwar Britain: Still Searching for an Explanation [Searching for an Explanation of Unemployment in Interwar Britain]," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 369-79, April.
- Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-93, August.
- Prakash Loungani & Mark Rush, 1990. "Sectoral shifts in interwar Britain," Working Paper Series, Macroeconomic Issues 90-7, Federal Reserve Bank of Chicago.
- Cross, Rodney, 1982. "How Much Voluntary Unemployment in Interwar Britain? [Searching for an Explanation of Unemployment in Interwar Britain]," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 380-85, April.
- Davis, Steven J., 1987. "Fluctuations in the pace of labor reallocation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 27(1), pages 335-402, January.
- Loungani, Prakash & Rush, Mark & Tave, William, 1990. "Stock market dispersion and unemployment," Journal of Monetary Economics, Elsevier, vol. 25(3), pages 367-388, June.
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