CFDP 848

An Aggregative Disequilibrium Model of the U.S. Labour Market


Publication Date: July 1987

Pages: 42


A model is presented in which aggregation over microsectors, each in different extent of disequilibrium, has implications analogous to the standard single aggregate sector switching disequilibrium model. Empirical implementation of the model of this paper is less involved than estimation of the standard model. Hence the approach here may be seen both as providing an underlying micro justification for the switching disequilibrium model, and as a computationally simpler (though statistically less efficient) technique. The model is estimated from post-war labour market quarterly data for the U.S. Manufacturing sector. We find the supply side more satisfactorily determined than in past disequilibrium studies.