Reallocation and the Changing Nature of Economic Fluctuations
We document several important changes in the nature of economic fluctuations that coincide with the onset of the Great Moderation and the Jobless Recoveries phenomenon. Labor productivity turned from strongly procyclical to countercyclical; sectoral reallocation of labor increased and became less temporally concentrated in the initial stages of a recession; much of the reduction in volatility of various aggregate time series was concentrated in the higher frequency component of those series, while the switch in cyclicality is concentrated in the medium frequency component; the ``efficiency wedge'' declined in importance relative to the ``labor wedge''. We construct a model of labor reallocation that can account for these facts.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
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- Barnichon, Regis, 2010. "Productivity and unemployment over the business cycle," Journal of Monetary Economics, Elsevier, vol. 57(8), pages 1013-1025, November.
- Daniel Aaronson & Ellen R. Rissman & Daniel G. Sullivan, 2004. "Can sectoral reallocation explain the jobless recovery?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 36-39.
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