Sectoral Shocks and Structural Unemployment

36 Pages Posted: 29 Jun 2004 Last revised: 24 May 2021

See all articles by Michael H. Riordan

Michael H. Riordan

Columbia University - Columbia Business School

Robert W. Staiger

Stanford University; University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: February 1988

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.

Suggested Citation

Riordan, Michael H. and Staiger, Robert W., Sectoral Shocks and Structural Unemployment (February 1988). NBER Working Paper No. w2522, Available at SSRN: https://ssrn.com/abstract=425555

Michael H. Riordan

Columbia University - Columbia Business School ( email )

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Robert W. Staiger (Contact Author)

Stanford University ( email )

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University of Wisconsin - Madison - Department of Economics ( email )

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Madison, WI 53706
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National Bureau of Economic Research (NBER)

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