Sectoral Shifts and Unemployment in Interwar Britain

S. Lael Brainard

No 3980, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper measures the importance of sectoral shifts, as against aggregate shocks and changes in search intensity, in explaining the persistent high unemployment that prevailed in interwar Britain. It develops a new measure of sectoral shifts that captures the arrival of information about reallocation shocks by using the cross-section variation in sectoral stock market excess returns over time. The cross-section variation series accounts for roughly one-quarter of the average level of aggregate unemployment during the interwar period, even after controlling for a variety of shocks to aggregate demand, and for roughly one-half of the variation in unemployment, suggesting an important role for sectoral shifts.

Date: 1992-01
Note: LS
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Published as With David M. Cutler, published as "Sectoral Shifts and Cyclical Unemployment Reconsidered", Quarterly Journal of Economics, Vol. 108, no. 1 , (1993): 219-243.

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