Cyclical fluctuations and sectoral reallocation. Evidence from the PSID

Prakash Loungani, Richard Rogerson

Research output: Contribution to journalArticlepeer-review

33 Scopus citations


This paper documents the correlation between permanent sectoral reallocation and the business cycle using data from the Michigan Panel Study of Income Dynamics. We find that the outflow of workers from goods to services accelerates during recessions. The flow from services to stable employment in surables accelerates during booms. We also document the contribution of sectoral reallocation to total unemployment. Permanent switchers account for about a quarter of the total weeks of unemployment during booms; this proportion rises to nearly 40% duing recessions.

Original languageEnglish (US)
Pages (from-to)259-273
Number of pages15
JournalJournal of Monetary Economics
Issue number2
StatePublished - Mar 1989
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


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