Demand shocks or mismatch: what’s behind labour mobility?

Abstract

Recent studies have reported increasing rates of interindustry labour mobility and characterise the consequences of this type of job mobility. However, few attempt to identify the mechanisms generating interindustry job mobility. This paper adds to the existing literature on the sources of between-industry job mobility and within- industry job mobility by investigating the relative importance of sectoral shocks and mismatch. We conclude that match heterogeneity is more important than sectoral shocks in determining between industry job mobility, while sectoral shocks are more important than mismatch in determining within industry job mobility. Our results are consistent with the existence of industry-specific skills and segmented labour markets whereby mobility across sectors is limited and adjustments to sectoral shocks is slow.