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Jobless Recovery and Structural Change: A VAR Approach

26 Pages Posted: 12 Dec 2016 Last revised: 10 Jun 2017

Li-Hsueh Chen

California State University, Los Angeles - College of Business & Economics

Zhen Cui

California State University, Los Angeles

Date Written: August 16, 2016

Abstract

This study uses a Vector Autoregression approach to examine the link between jobless recoveries and the fast employment expansion in finance, health, and education (FHE) sectors. Both reduced-form estimates and impulse responses indicate a negative effect of the expansion on aggregate employment. While the expansion Granger-causes aggregate employment fluctuations, up to 40% of the error variance of those fluctuations can be explained by innovations in the expansion. Moreover, movements in aggregate employment are reduced by 25% when the expansion is accounted for. Therefore, the fast expansion of the FHE sectors is shown to have notably contributed to the onset of jobless recoveries.

Keywords: Jobless Recovery, Structural Change, Sectoral Shift, VAR

JEL Classification: E24, E32, C32

Suggested Citation

Chen, Li-Hsueh and Cui, Zhen, Jobless Recovery and Structural Change: A VAR Approach (August 16, 2016). Available at SSRN: https://ssrn.com/abstract=2883617 or http://dx.doi.org/10.2139/ssrn.2883617

Li-Hsueh Chen

California State University, Los Angeles - College of Business & Economics ( email )

United States

Zhen Cui (Contact Author)

California State University, Los Angeles ( email )

5151 State University Dr
Los Angeles, CA 90032
United States

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