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The Cyclical Behavior of Job Creation and Job Destruction: A Sectoral Model

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  • Greenwood, Jeremy
  • MacDonald, Glenn M
  • Zhang, Guang-Jia

Abstract

Three key features of the employment process in the U.S. economy are that job creation is procyclical, job destruction is countercyclical, and job creation is less volatile than job destruction. These features are also found at the sectoral (goods and services) level. The paper develops, calibrates and simulates a two-sector general equilibrium model that includes both aggregate and sectoral shocks. The behavior of the model economy mimics the job creation and destruction facts. A non-negligible amount of unemployment arises due to the presence of aggregate and sectoral shocks.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 7 (1996)
Issue (Month): 1 (January)
Pages: 95-112

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Handle: RePEc:spr:joecth:v:7:y:1996:i:1:p:95-112

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  1. Richard Rogerson, 2010. "Indivisible Labor, Lotteries and Equilibrium," Levine's Working Paper Archive 250, David K. Levine.
  2. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  3. Loungani, Prakash & Rogerson, Richard, 1989. "Cyclical fluctuations and sectoral reallocation : Evidence from the PSID," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 259-273, March.
  4. Danthine, J.P. & Donaldson, J.B., 1993. "Computing Equilibria of Non-Optimal Economies," Papers 93-01a, Columbia - Graduate School of Business.
  5. Hansen, Gary D & Imrohoroglu, Ayse, 1992. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 118-42, February.
  6. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
  7. Jeremy Greenwood & Gregory W. Huffman, 1988. "On Modelling the Natural Rate of Unemployment with Indivisible Labour," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 587-609, August.
  8. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-93, August.
  9. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
  10. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
  11. Gary D. Hansen & Randall Wright, 1992. "The labor market in real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 2-12.
  12. John M. Barron & Wesley Mellow, 1979. "Search Effort in the Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 14(3), pages 389-404.
  13. Rogerson, Richard & Wright, Randall, 1988. "Involuntary unemployment in economies with efficient risk sharing," Journal of Monetary Economics, Elsevier, vol. 22(3), pages 501-515.
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