We study the effect of mean-preserving labor reallocation on business cycle outcomes. We develop an empirical … model of the labor market. The model reproduces the empirical results subject to inclusion of two key, empirically plausible …

accompanied by an economic boom, and followed by a slump. Moreover, during episodes of large capital inflows capital and labor … labor reallocation. Larger credit booms and capital inflows during the episodes we identify increase the probability of a … significantly related to the extent of labor reallocation during the boom, with a stronger shift of labor out of manufacturing …