A CROSS-INDUSTRY EXAMINATION OF THE LUCAS MISPERCEPTIONS MODEL

By establishing the theoretical connection between sectoral labor and product markets, we explicitly develop the economic relationship of th ese markets within the imperfect information new classical explanation of business-cycles. We then conduct an empirical analysis of the shor t-run cyclical behavior of real output, prices and wages at the sector al level of disaggregation. We estimate both time-series and cross-sec tional regressions for 28 private two-digit Standard Industrial Classi fication (SIC) industries. Industry-specific demand variability does n ot induce a greater misperception of aggregate demand shocks that woul d differentiate cyclical fluctuations across industries as hypothesize d by the new classical imperfect-information explanation.