Aggregate Employment Fluctuations and Agricultural Share

Jose Da Rocha and Diego Restuccia

Working Papers from University of Toronto, Department of Economics

Abstract: Differences in employment volatility and the correlation of employment with output across countries are often cited as examples of the limitation of standard real business cycle (RBC) theory to reproduce the observed labor market facts. These observations have lead researchers to argue for the necessity of Non-Walrasian features to reflect the labor institutions in European countries. In this paper, we show that the same labor market evidence is observed in regional economies with the same labor market institutions. We conjecture that differences in agricultural activity can generate the observed differences in labor market behavior. We show that a standard two-sector RBC model with agriculture and non-agriculture can account for the observed labor market facts. In particular, as the size of agricultural activity increases, aggregate employment volatility and the correlation between aggregate employment and output decrease. Moreover, contrary to the Non-Walrasian approach to business cycles, agricultural activity can account for the correlation between aggregate employment and output as reported by Danthine and Donaldson (1993) for Europe and the U.S.

Keywords: Business Cycles; Agriculture; Two-sector Model. (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2002-10-11
New Economics Papers: this item is included in nep-dge and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.economics.utoronto.ca/public/workingPapers/UT-ECIPA-DIEGOR-02-02.pdf MainText (application/pdf)

Related works:
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:tor:tecipa:diegor-02-02

Access Statistics for this paper

More papers in Working Papers from University of Toronto, Department of Economics 150 St. George Street, Toronto, Ontario.
Bibliographic data for series maintained by RePEc Maintainer ().