Arbeitspapier
Lost in Transition: The Costs and Consequences of Sectoral Labour Adjustment
This paper demonstrates that factors which impede labour market adjustments can have first-order impacts on aggregate output and social welfare. While several studies find that individual workers can face large and persistent sectoral reallocation costs, this paper shows that these costs are important at the aggregate level. I use a search and matching model to isolate and quantify two factors that contribute to the costly and time-consuming adjustment process: search frictions and an inability to transfer match-specific skills to new jobs. I apply the model to examine Canada's sectoral labour adjustment after a global increase in commodity prices and associated exchange rate appreciation. These developments reorganized production to the resource sector and away from manufacturing. The model quantitatively captures both the sectoral employment and wage effects and the response of unemployment to changes in unemployment benefits. The model estimates that the costs of adjustment are economically important, accounting for up to three percent of output during the transition. These costs arise mainly in the first three years after the shock and are due largely to non-transferable skills. Finally, the analysis reveals important policy implications. Because changes to unemployment benefits affect sectors differently, these changes impact the economy's sectoral composition and aggregate productivity.
- Language
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Englisch
- Bibliographic citation
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Series: Queen's Economics Department Working Paper ; No. 1142
- Classification
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Wirtschaft
Labor Economics Policies
Labor Force and Employment, Size, and Structure
Human Capital; Skills; Occupational Choice; Labor Productivity
Energy and the Macroeconomy
- Subject
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Sectoral Labour Reallocation
Adjustment Costs
Search and Matching
Skills and Training
Unemployment
Strukturelle Arbeitslosigkeit
Suchtheorie
Anpassungskosten
Qualifikation
Arbeitslosenversicherung
Kanada
- Event
-
Geistige Schöpfung
- (who)
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Tapp, Stephen
- Event
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Veröffentlichung
- (who)
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Queen's University, Department of Economics
- (where)
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Kingston (Ontario)
- (when)
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2007
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Tapp, Stephen
- Queen's University, Department of Economics
Time of origin
- 2007
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Determinacy Through Intertemporal Capital Adjustment Costs
Capital mobility and costs of adjustment
Welfare Costs of Catastrophes: Lost Consumption and Lost Lives
Adjustment Costs and Long Run Spatial Agglomerations
Mitigating the adjustment costs of international trade