Your browser does not support the PubReader view.
Go to this page to see a list of supporting browsers.
Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 29, No. 3, pp.305-330
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.

References

  • Aaronson, Daniel, Ellen Rissman, and Daniel Sullivan. “Can Sectoral Reallocation Explain the Jobless Recovery?” Economic Perspectives 28 (2004): 36-49.
  • Abraham, Katherine, and Lawrence Katz. “Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?” Journal of Political Economy 94 (No. 3 1986): 507-22. [https://doi.org/10.1086/261387]
  • Andolfatto, David, and Glenn MacDonald. Jobless Recoveries, 2006. Available at: http://www2.dse.unibo.it/soegw/paper/AndolfattomacDonald.pdf, .
  • Autor, David, Lawrence Katz, and Melissa Kearney. “Trends in U.S. Wage Inequality: Revising the Revisionists.” Review of Economics and Statistics 90 (No. 2 2008): 300-23. [https://doi.org/10.1162/rest.90.2.300]
  • Bachmann, Rudiger. Understanding the Jobless Recoveries after 1991 and 2001, 2012. Available at: http://www3.nd.edu/~rbachman/bachmann_jlr_2012.pdf, .
  • Berger, David. Countercyclical Restructuring and Jobless Recoveries, 2012. Available at: http://economics.mit.edu/files/7498, .
  • Broda, Christian, and David Weinstein. “Globalization and the Gains from Variety.” Quarterly Journal of Economics 121 (No. 2 2006): 541-85. [https://doi.org/10.1162/qjec.2006.121.2.541]
  • Frazis, Harley, and Jay Stewart. Tracking the Returns to Education in the Nineties: Bridging the Gap between the New and Old CPS Education Items. BLS Working Paper No. 288, 1996.
  • Garin, Julio, Michael Pries, and Eric Sims. Reallocation and the Changing Nature of Economic Fluctuations, 2013. Available at: http://www3.nd.edu/~esims1/gps_june27_2013.pdf, .
  • Goldin, Claudia, and Lawrence Katz. Long-Run Changes in the U.S. Wage Structure: Narrowing, Widening, Polarizing. NBER Working Paper No. 13568, 2007. [https://doi.org/10.3386/w13568]
  • Groshen, Erica, and Simon Potter. “Has Structural Change Contributed to a Jobless Recovery?” Current Issues in Economics and Finance 9 (No. 8 2003): 1-7.
  • King, Miriam, Steven Ruggles, and Trent Alexander. Integrated Public Use Microdata Series: Current Population Survey. Machine-readable Database. Minneapolis: University of Minnesota, 2014.
  • Koenders, Kathryn, and Richard Rogerson. “Organizational Dynamics over the Business Cycle: A View on Jobless Recoveries.” Federal Reserve Bank of St. Louis Review (No. 87 2005): 555-79. [https://doi.org/10.20955/r.87.555-580]
  • Lee, Chulhee. “Changing Industrial Structure and Economic Activity of Older Males in Korea: 1980-2000.” Seoul Journal of Economics 17 (No. 2 2004): 182-234.
  • Lilien, David. “Sectoral Shifts and Cyclical Unemployment.” Journal of Political Economy 90 (No. 4 1982): 777-93. [https://doi.org/10.1086/261088]
  • Shimer, Robert. “The Cyclical Behavior of Equilibrium Unemployment and Vacancies.” American Economic Review 95 (No. 1 2005): 25-49. [https://doi.org/10.1257/0002828053828572]
  • Shimer, Robert. “Wage Rigidities and Jobless Recoveries.” Journal of Monetary Economics 59 (2012): 65-77. [https://doi.org/10.1016/j.jmoneco.2012.10.024]
  • Stock, James, and Mark Watson. Has the Business Cycle Changed and Why? NBER Working Paper No. 9127, 2002. [https://doi.org/10.3386/w9127]