The effects of oil price shocks on job reallocation

Ana María Herrera, Mohamad B. Karaki

Research output: Contribution to journalArticlepeer-review

55 Scopus citations


We investigate the effect of oil price innovations on U.S. manufacturing job flows using a simultaneous equation model that nests symmetric and asymmetric responses. We find no evidence of asymmetry in the response of job flows to positive and negative oil price innovations. We then inquire whether firms, when facing positive shocks, shed jobs faster than they create jobs. We show that positive innovations lead to a decline in net employment and an increase in job reallocation, possibly due to search and matching issues. Yet, the latter effect becomes statistically insignificant when we control for data mining. We demonstrate that the cumulative one-year effect of oil price shocks on job creation and destruction was smaller during the Great Moderation, but it was larger for gross job reallocation. These variations were caused by a change in the transmission channel and not by smaller oil price shocks.

Original languageEnglish
Pages (from-to)95-113
Number of pages19
JournalJournal of Economic Dynamics and Control
StatePublished - Dec 2015

Bibliographical note

Publisher Copyright:
© 2015 Elsevier B.V.


  • Asymmetric responses
  • Job flows
  • Job reallocation
  • Oil prices

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization
  • Applied Mathematics


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