Micro vs macro explanations of post-war US unemployment movements

Chris Heaton, Paul Oslington

Research output: Contribution to journalArticle

Abstract

We consider the contribution of sectoral shocks to post-war US unemployment movements in a dynamic factor framework. Whereas previously published estimates of the contribution of sectoral shocks to unemployment relate to a particular theory of unemployment, our approach is sufficiently general to encompass almost any theory. We estimate our model in the frequency domain and use data on unemployment rather than employment or output. Sectoral shocks are found to account for around half the movements in US unemployment. These shocks tend to be of higher frequency than the common shocks and concentrated in the service and manufacturing sectors. Shock frequencies, sectoral patterns and flows provide some clues to the identity of some of the shocks driving unemployment. In some periods, such as the rise in unemployment in the 1970s, common shocks were dominant, but sectoral shocks have been more important in recent years.
Original languageEnglish
Pages (from-to)1-17
Number of pages17
JournalMacquarie economics research papers
Volume2006
Issue number4
Publication statusPublished - 2006

Keywords

  • structural unemployment
  • sectoral vs. aggregate shocks
  • dynamic factor analysis

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