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Sectoral Reallocation and Information Economics

Amberger, Korie
http://orcid.org/0000-0002-4075-2202
http://rave.ohiolink.edu/etdc/view?acc_num=osu1429615391

Abstract Details

2015, Doctor of Philosophy, Ohio State University, Economics.
In my first chapter, I note that cyclical U.S. labor markets have seen a reduction in fluctuations since the Great Moderation. Concurrent with this event, I show evidence of reduced cross-sector labor mobility. I quantify the impact of sectoral reallocation in shaping labor market volatility by developing a Diamond-Mortensen-Pissarides model. Calibrated to pre-1984 data, the model lets me ask how much of the Great Moderation is explained by a rise in reallocation frictions. Fluctuations in all labor market variables fall following the change. The benchmark two-sector model also generates higher labor market volatility, nearer the data, when compared to the predictions of a single-sector version. When one sector faces a negative shock, it sees not only a drop in expected match value but also expected outside value falls only marginally as more workers consider reallocation. These effects combine to produce larger declines in expected surplus, boosting the separation rate and lowering the job-finding rate. Increased barriers to reallocation weaken these additional sources of volatility. What causes economic fluctuations? A growing literature considers noise shocks, shocks affecting only expectations. Most research in the area has adopted a framework without capital. In my second chapter, I explore the implications of this omission. Incorporating endogenous capital accumulation in a New Keynesian model, I find it reduces the impact of noise shocks, halving the initial output response. When a noise shock hits, investment responds weakly and output is mostly driven by consumption. Usable capital on impact is fixed, so diminishing returns restrain the initial response in labor and output. Subsequent adjustments to the capital stock are gradual in equilibrium, leaving the overall output response muted relative to the labor-only noise shock models. Are sunspots, information uncorrelated with economic fundamentals, an important source of volatility? Experimental evidence suggests that individuals respond to sunspots, but sunspots are largely the only source of information. My last chapter examines what leads people to use sunspots when they have access to fundamental information. Subjects want to operate in the true (fundamental) state, but achieve lower payoffs for coordination. Fundamental information is provided by a private, imperfect signal. Subjects also see a sunspot in the form of a random public signal and are given no instruction on how to use the information. I find that individuals are more likely to converge on using the sunspot when fundamental information is noisy. When the information set is expanded to include a static and dynamic sunspot signal, convergence is weaker, but focused on the volatile, dynamic option. Together, my results suggest the pull of sunspots is stronger in times of high fundamental uncertainty, and can be responsible for the rise in economic volatility typically associated with these periods.
Julia Thomas (Advisor)
Aubhik Khan (Committee Member)
James Peck (Committee Member)
157 p.
Economics
sectoral reallocation; labor markets; volatility; search and matching; sunspots

Recommended Citations

Citations

  • Amberger, K. (2015). Sectoral Reallocation and Information Economics [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1429615391

    APA Style (7th edition)

  • Amberger, Korie. Sectoral Reallocation and Information Economics. 2015. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1429615391.

    MLA Style (8th edition)

  • Amberger, Korie. "Sectoral Reallocation and Information Economics." Doctoral dissertation, Ohio State University, 2015. http://rave.ohiolink.edu/etdc/view?acc_num=osu1429615391

    Chicago Manual of Style (17th edition)

osu1429615391
609
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This open access ETD is published by The Ohio State University and OhioLINK.