Essays on sectoral shifts of labor demand: measurements and effects on the incidence and the duration of unemployment

Sectoral shifts of labor demand can have signi?cant e?ects on aggregate rate and duration of unemployment, and this is known as sectoral shifts hypothesis. To mea?sure the sectoral shifts, past studies use David M. Lilien?s dispersion measure which represents the e?ect of the changes in the distribution of sectoral shocks on aggregate rates of layo?s. This dissertation proposes an improved measure of sectoral shifts and tests the sectoral shifts hypothesis. It shows that, when the distribution of sectoral shocks is asymmetric, dispersion alone is not su?cient to capture the e?ect of the changes in distribution and, the skewness of the distribution can have a signi?cant role in the approximation of aggregate rates of layo?s. Empirical results show a sig?ni?cant e?ect of the skewness measure on the aggregate rate of unemployment. The results also lend a strong support for the sectoral shifts hypothesis in Lilien type and Abraham-Katz type models, which contrasts with the rejection of the hypothesis in previous studies of the Abraham-Katz type models. One concern about these empirical results is that the classical measures of disper?sion and skewness are very sensitive to the presence of outliers and consequently the test of the hypothesis can be distorted by this presence. Strong evidence exists for the presence of outliers in the distribution of estimated sectoral shocks. Various robust measures of dispersion and skewness are computed. The sectoral shifts hypothesis is still strongly supported when the robust measures are used. This reinforces the empirical ?ndings under the classical measures. When the mobility of workers across sectors is limited because of frictions in the labor market, workers who become unemployed due to sectoral shifts of labor demand will experience a longer duration of unemployment because of the time associated with switching sectors. Therefore, for a given rate of unemployment, a higher proportion of these workers will increase the average duration of unemployment. Empirical results show that sectoral shifts have a statistically greater e?ect on the average duration of unemployment than cyclical ?uctuations. Sectoral shifts help explain unusual upward trends in the duration of unemployment in the 1990s.