The aggregate effects of sectoral reallocations

Christopher Phelan, Alberto Trejos

Research output: Contribution to journalArticlepeer-review

16 Scopus citations


Can a one-time, permanent change in the fundamentals behind the sectoral composition of the economy prompt an aggregate downturn? Can this downturn be non-negligible, even if one uses US data to determine the relative size of gross vs. net job flows, and the importance of job creation costs? Can one consider the military build-down of the 1990s as a plausible cause for the 1990-1991 recession? Do sectoral reallocations generate responses that are qualitatively similar to 'productivity shocks?' We use a variant of the Mortensen-Pissarides (1994. Review of Economic Studies 61, 397-415) job creation/destruction model, calibrate it to US labor market data, and run experiments that suggest one can answer yes to all these questions.

Original languageEnglish (US)
Pages (from-to)249-268
Number of pages20
JournalJournal of Monetary Economics
Issue number2
StatePublished - Apr 2000


  • Business cycles
  • E32
  • Matching
  • Sectoral shocks

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