Reallocation and the Changing Nature of Economic Fluctuations

Eric Sims () and Michael Pries ()
Authors registered in the RePEc Author Service: Julio Garin

No 1258, 2011 Meeting Papers from Society for Economic Dynamics

Abstract: We document several important changes in the nature of economic fluctuations that coincide with the onset of the Great Moderation and the Jobless Recoveries phenomenon. Labor productivity turned from strongly procyclical to countercyclical; sectoral reallocation of labor increased and became less temporally concentrated in the initial stages of a recession; much of the reduction in volatility of various aggregate time series was concentrated in the higher frequency component of those series, while the switch in cyclicality is concentrated in the medium frequency component; the ``efficiency wedge'' declined in importance relative to the ``labor wedge''. We construct a model of labor reallocation that can account for these facts.

Date: 2011
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