Macroeconomic Effects of Job Reallocations: A Survey

We provide a critical overview of the approaches that have characterized the empirical literature on the macroeconomic effects of job reallocations.

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Abstract. This paper critically appraises the approaches that have characterized the literature on the macroeconomic effects of job reallocations. Since Lilien’s (1982) seminal contribution there has been a flourishing of empirical analysis but no unifying theoretical framework has obtained consensus in the scientific debate. We face a corpus of research which is heterogeneous in variables’ selection and experimental design. This heterogeneity makes the evaluation of results a daunting task. As a guiding principle for our excursion we track down the methodological development of the solutions to the crucial problem of observational equivalence of aggregate and sectoral reallocation shocks. We draw two main conclusions from our analysis. The first is that the non-directional nature of reallocation shocks holds the key to the solution of the fundamental identification problem. In this sense the recent perspective on job creation and destruction
shows much promise. The second conclusion is that sectoral reallocation of labor has been responsible for no less that 1/4 and no more that 2/3 of the variance of aggregate unemployment in postwar data. While this range may seem wide it is an indication that the importance of labor reallocation may have changed over time, being quite large at particular historical junctures.

Citation

@article{gallipoli2013macroeconomic,
  title={Macroeconomic Effects of Job Reallocations: a Survey},
  author={Gallipoli, Giovanni and Pelloni, Gianluigi},
  journal={Review of Economic Analysis},
  volume={5},
  number={2},
  pages={127--176},
  year={2013},
  publisher={RCEA}
}

Author: gallipol

Giovanni Gallipoli is a professor at UBC in Vancouver. Giovanni's research focuses on the origins and consequences of economic inequality with a focus on how heterogeneity shapes individual behaviors and aggregate economic outcomes. Giovanni has worked on a variety of topics, including the equilibrium effects of policies that promote skill formation; the link between skill heterogeneity and a country's comparative advantage; the influence of families on long-term outcomes such as labor supply and consumption; intergenerational mobility and the linkages between parental heterogeneity and inequality; and how firm-level differences contribute to variation in workers’ skill returns. Giovanni is a recipient of the Killam Research Award, the FEEM Award, and the Young Economist Award of the European Economic Association. He is a CEPR research fellow as well as a former Fulbright Scholar and Weatherhall fellow. He serves as a member of the external board of overseers of the Panel Study of Income Dynamics (PSID) and as an associate editor of the Journal of Political Economy. Giovanni is an alumnus of the Sant'Anna School of Advanced Studies and the University of Pisa in Italy. He received his Ph.D. in Economics from University College London in the UK.