Macroeconomic Effects of Job Reallocations: A Survey

Quaderni - Working Paper DSE N° 897

50 Pages Posted: 30 Jul 2013

See all articles by Giovanni Gallipoli

Giovanni Gallipoli

Vancouver School of Economics, UBC; Centre for Economic Policy Research (CEPR); University of Chicago - Becker Friedman Institute for Economics

Gianluigi Pelloni

University of Bologna - School of Economics, Management, and Statistics

Date Written: July 30, 2013

Abstract

This paper critically appraises the approaches that have characterized the literature on the macroeconomic effects of job reallocations. Since Lilien's (1982) seminal contribution there has been a flourishing of empirical analysis but no unifying theoretical framework has obtained consensus in the scientific debate.

We face a corpus of research which is heterogeneous in variables' selection and experimental design. This heterogeneity makes the evaluation of results a daunting task. As a guiding principle for our excursion we track down the methodological development of the solutions to the crucial problem of observational equivalence of aggregate and sectoral reallocation shocks. We draw two main conclusions from our analysis.

The first is that the non-directional nature of reallocation shocks holds the key to the solution of the fundamental identification problem. In this sense the recent perspective on job creation and destruction shows much promise. The second conclusion is that sectoral reallocation of labor has been responsible for no less that 1/4 and no more that 2/3 of the variance of aggregate unemployment in postwar data. While this range may seem wide it is an indication that the importance of labor reallocation may have changed over time, being quite large at particular historical junctures.

Keywords: labor reallocation, unemployment, sectoral shifts, methodology, assessment

JEL Classification: E30, C10, J21

Suggested Citation

Gallipoli, Giovanni and Pelloni, Gianluigi, Macroeconomic Effects of Job Reallocations: A Survey (July 30, 2013). Quaderni - Working Paper DSE N° 897, Available at SSRN: https://ssrn.com/abstract=2303626 or http://dx.doi.org/10.2139/ssrn.2303626

Giovanni Gallipoli (Contact Author)

Vancouver School of Economics, UBC ( email )

6000 Iona drive
Vancouver, BC BC V6T 1L4
Canada

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of Chicago - Becker Friedman Institute for Economics ( email )

Chicago, IL 60637
United States

Gianluigi Pelloni

University of Bologna - School of Economics, Management, and Statistics ( email )

Piazza Scaravilli 1
40126 Bologna, 47100
Italy

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