Inter- and intrasectoral shocks: Effects on the unemployment rate

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Abstract

Intersectoral shocks require resource reallocation across sectors while intrasectoral shocks require resource reallocation within sectors. A crucial difference between these shocks is that the former require much higher adjustment costs than the latter. Using accounting data to calculate returns on capital in manufacturing industries, I generate proxies for these shocks. I find that the magnitude of intrasectoral shocks is much greater than that of intersectoral shocks but inter-sectoral shocks explain the aggregate unemployment rate better than intrasectoral shocks. I also find that intersectoral shocks are more closely related to the unemployment rate in the later part of the sample considered.

Original languageEnglish
Pages (from-to)376-401
Number of pages26
JournalJournal of Labor Economics
Volume15
Issue number2
DOIs
Publication statusPublished - 1997 Apr

ASJC Scopus subject areas

  • Industrial relations
  • Economics and Econometrics

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