Labor Reallocation: Panel Evidence from U.S. States
- Publisher: The Rimini Centre for Economic Analysis
Unemployment, Sectoral Shifts, Employment Fluctuations, Dynamic Panel Data, Parameter Heterogeneity, Cross-Sectional Dependence
This paper re-examines Lilienâ€™s sectoral shifts hypothesis for U.S. unemployment. We employ a monthly panel that spans from 1990:01 to 2011:12 for 48 U.S. states. Panel unit root tests that allow for cross-sectional dependence reveal the stationarity of unemployment. Within a framework that takes into account dynamics, parameter heterogeneity and cross-sectional dependence in the panel, we show that sectoral reallocation is significant not only at the aggregate level but also at the state level. The magnitude and the statistical significance of the latter as measured by Lilienâ€™s index increases when both heterogeneity and cross-sectional dependence are taken into account.