Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?
Katharine Abraham and
Lawrence Katz
No 1410, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
Recent work by David Lilien has argued that the existence of a strong positive correlation between the dispersion of employment growth rates across sectors (G) and the unemployment rate implies that shifts in demand from some sectors to others are responsible for a substantial fraction of cyclical variation in unemployment. This paper demonstrates that, under certain empirically satisfied conditions, aggregate demand movements alone can produce a positive correlation between G and the unemployment rate. Two tests are developed which permit one to distinquish between a pure sectoral shift interpretation and a pure aggregate demand interpretation of this positive correlation. The finding that G and the volume of help wanted advertising are negatively related and the finding that G is directly associated with the change in unemployment rather than with the level of unemployment both support an aggregate demand interpretation. A proxy for sectoral shifts that is purged of the influence of aggregate demand is then developed. Models which allow sectoral shifts in the composition of demand and fluctuations in the aggregate level of demand to affect the unemployment rate independently are estimated using this proxy. The results support the view that pure sectoral shifts have not been an important source of cyclical fluctuations in unemployment.
Date: 1984-07
Note: LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)
Published as Abraham, Katherine G. and Lawrence F. Katz. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?" Journal of Political Economy, Vol. 94 , No. 3, (June 1986), pp. 507-522.
Downloads: (external link)
http://www.nber.org/papers/w1410.pdf (application/pdf)
Related works:
Journal Article: Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances? (1986) 
Working Paper: Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances? (1986) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:1410
Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1410
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().