Intersectoral Labor Immobility, Sectoral Comovement, and News Shocks

Munechika Katayama, Kwang Hwan Kim

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)


Sectoral comovement of output and hours worked is a prominent feature of business cycle data. However, most two-sector neoclassical models fail to generate this sectoral comovement. We construct and estimate a two-sector neoclassical Dynamic Stochastic General Equilibrium (DGSE) model generating sectoral comovement in response to both anticipated and unanticipated shocks. The key to our model's success is a significant degree of intersectoral labor immobility, which we estimate using data on sectoral hours worked. Furthermore, we demonstrate that imperfect intersectoral labor mobility provides a better explanation for the sectoral comovement than an alternative model emphasizing the role of labor-supply wealth effects.

Original languageEnglish
Pages (from-to)77-114
Number of pages38
JournalJournal of Money, Credit and Banking
Issue number1
Publication statusPublished - 2018 Feb 1


  • labor immobility
  • news shocks
  • nonseparable preferences
  • sectoral comovement
  • unanticipated shocks

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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