Regional and Sectoral Evidence of the Macroeconomic Effects of Labor Reallocation: A Panel Data Analysis

26 Pages Posted: 21 Nov 2016

See all articles by Dimitrios Bakas

Dimitrios Bakas

Nottingham Trent University

Theodore Panagiotidis

University of Macedonia - Department of Economics

Gianluigi Pelloni

University of Bologna - Rimini Center for Economic Analysis (RCEA)

Date Written: January 2017

Abstract

This article revisits the sectoral shifts hypothesis by examining unemployment fluctuations for 48 U.S. states over the period 1990:M01–2011:M12. We develop a panel approach that incorporates dynamics, parameter heterogeneity, aggregate factors, and cross‐sectional dependence (CSD). Our findings provide support for a positive and significant effect of the employment dispersion index on unemployment. This outcome is robust under alternative specifications and measures of employment dispersion. The empirical evidence corroborates the presence and relevance of CSD and heterogeneity among states. The results show that, once unobserved common factors and cross‐state heterogeneity are taken into account, labor reallocation has a significant effect on unemployment that is half the size of the estimate when cross‐sectional dependence is not taken into account.

JEL Classification: E24, E32, J21, R23, C23

Suggested Citation

Bakas, Dimitrios and Panagiotidis, Theodore and Pelloni, Gianluigi, Regional and Sectoral Evidence of the Macroeconomic Effects of Labor Reallocation: A Panel Data Analysis (January 2017). Economic Inquiry, Vol. 55, Issue 1, pp. 501-526, 2017, Available at SSRN: https://ssrn.com/abstract=2872434 or http://dx.doi.org/10.1111/ecin.12363

Dimitrios Bakas (Contact Author)

Nottingham Trent University ( email )

Burton Street
NG1 4BU Nottingham
United Kingdom

Theodore Panagiotidis

University of Macedonia - Department of Economics ( email )

Thessaloniki, 54006
Greece

Gianluigi Pelloni

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

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