Intersectoral Labor Immobility, Sectoral Comovement, and News Shocks

Munechika Katayama and Kwang Hwan Kim

Journal of Money, Credit and Banking, 2018, vol. 50, issue 1, 77-114

Abstract: Sectoral comovement of output and hours worked is a prominent feature of business cycle data. However, most two‐sector neoclassical models fail to generate this sectoral comovement. We construct and estimate a two‐sector neoclassical Dynamic Stochastic General Equilibrium (DGSE) model generating sectoral comovement in response to both anticipated and unanticipated shocks. The key to our model's success is a significant degree of intersectoral labor immobility, which we estimate using data on sectoral hours worked. Furthermore, we demonstrate that imperfect intersectoral labor mobility provides a better explanation for the sectoral comovement than an alternative model emphasizing the role of labor‐supply wealth effects.

Date: 2018
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https://doi.org/10.1111/jmcb.12454

Related works:
Working Paper: Inter-sectoral Labor Immobility, Sectoral Co-movement, and News Shocks (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:50:y:2018:i:1:p:77-114

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