Sectoral Shifts and Cyclical Unemployment: A Reconsideration

Thomas Palley

Economic Inquiry, 1992, vol. 30, issue 1, 117-33

Abstract: The debate over the relative importance of sectoral and aggregate shocks in explaining fluctuations in the aggregate unemployment rate has centered on the relationship between unemployment, job vacancies, and the dispersion of sectoral employment growth rates (which proxies for sectoral shocks). This paper examines some possible theoretical relationships between these variables and, after decomposing unemployment into components attributable to sectoral and aggregate shocks, estimates the importance of each. It finds that fluctuations in unemployment are principally caused by aggregate shocks, but sectoral shifts explain a significant, albeit steady, amount of unemployment. Copyright 1992 by Oxford University Press.

Date: 1992
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