Labor Market Dynamics During a Period of Structural Adjustment: California in the Early 1990s

Abstract:     
This paper contributes to the literature on labor market dynamics in four ways. First, unlike most of the existing literature, it uses the Survey of Income and Program Participation (SIPP). This panel survey, with a 32 months window of observation, allows a more precise measure of employment flows than other data sources. We find that one out of three workers experiences a job transition during the observation period. Second, it focuses on the state of California during an economic cycle. According to our estimates, the net decline in employment represents just 2.6 percent of all job rotations (separations offset by accessions), and gross job flows were as important during the downturn as they were during the economic expansion. Third, it estimates gross flows by sector, and finds significant variation in gross flows relative to employment across sectors of economic activity. Fourth, it examines the coexistence of cyclical and structural changes of California in the early 1990s. The results suggest a labor market link between structural changes and economic cycles.

JEL Classifications: J21, J63

Accepted Paper Series