Labour reallocation and unemployment fluctuations: A tale of two tails

Abstract

This paper examines the sectoral shifts hypothesis for the US regional labour market using a quantile panel framework. We use a monthly panel dataset that spans over 1990–2016 for the 48 US states and employ a dynamic quantile panel data regression approach to investigate the asymmetric nature of the relationship between sectoral labour reallocation and unemployment fluctuations. The empirical evidence suggests that the impact of the employment dispersion index is relatively small and insignificant for lower levels of unemployment but becomes positive and highly significant for higher rates. Our findings bear out the asymmetry of reallocation disturbances for the US labour market.