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Seoul Journal of Economics - Vol. 29 , No. 3
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Seoul Journal of Economics - Vol. 29, No. 3, pp. 305-330
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 31 Aug 2016
Received 03 May 2015 Revised 16 Sep 2015 Accepted 05 Apr 2016

Jobless Recoveries and Skill-Biased Sectoral Shift
Zhen Cui
Zhen Cui, Assistant Professor, Department of Economics and Statistics, College of Business and Economics, California State University Los Angeles, Los Angeles, CA 90032, Tel: 323-343-2939, Fax: 323-343-5462 (zcui@calstatela.edu)

JEL Classification: E24, E32

Abstract

This study first defines skill-biased sectoral shift using two stylized facts. Specifically, the shift features the service sector having more college workers and becoming more productive than the goods sector. Subsequently, this study develops a two-sector model in which the shift is incorporated via a sector-specific labor adjustment cost and a reallocation shock. Although the model generates a jobless recovery, its implications on unemployment duration are not entirely consistent with the data. Therefore, this study considers its sectoral theory as promising, but does not claim that such theory fully explains jobless recoveries, especially when the existence of many alternative explanations is considered.

Keywords: Jobless recovery, Sectoral shift, Reallocation shock, Labor adjustment cost
Acknowledgments

I thank the members of my doctoral dissertation committee, Paul Evans, Pok-Sang Lam, Byoung Hoon Seok, and Lucia Dunn, as well as two anonymous referees for their constructive comments and suggestions.

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