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.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics