Working Paper: NBER ID: w2522
Authors: Michael H. Riordan; Robert W. Staiger
Abstract: When current employers rave more information about worker quality than to potential employers, sectoral shocks cause structural unemployment. That is, some workers laid off from an injured sector remain unemployed despite the fact that trey are of sufficient quality to be productively employed in an expanding sector at toe prevailing wage, Moreover, sectoral unemployment rates are not monotonic in one severity of sectoral shocks due to one interaction of layoff activity and hiring activity. Finally, equilibrium employment decisions are not constrained Pareto efficient, and can be improved by a policy of adjustment assistance.
Keywords: sectoral shocks; structural unemployment; labor market; informational asymmetries; adjustment assistance
JEL Codes: J64; E24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| sectoral shocks (F41) | structural unemployment (J64) |
| laid off workers (injured sector) (J65) | structural unemployment (J64) |
| potential employers' inability to assess worker capabilities (J68) | structural unemployment (J64) |
| sectoral shocks (F41) | layoffs in injured sector (J65) |
| layoffs in injured sector (J65) | unemployment rates in favored sector (J68) |
| magnitude of sectoral shocks (F41) | unemployment rates (J64) |