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Aggregate employment fluctuations with microeconomic asymmetries

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  • Jeffrey R. Campbell
  • Jonas D.M. Fisher

Abstract

We provide a simple explanation for the observation that the variance of job destruction is greater than the variance of job creation. In our model profit maximization in the presence of proportional plant-level costs of job creation and destruction implies that shrinking plants are more sensitive than growing plants to aggregate shocks. We describe circumstances in which this microeconomic asymmetry is preserved in the aggregate and show that it can account for asymmetries in the variability of job creation and destruction of the kind observed in the U.S. manufacturing sector. This is so even though we abstract from job search and matching frictions, incomplete contracts, and aggregate congestion effects, all of which have been put forward as important for understanding the job creation and destruction evidence.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series, Macroeconomic Issues with number WP-96-17.

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Date of creation: 1998
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Handle: RePEc:fip:fedhma:wp-96-17

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Keywords: Downsizing of organizations ; Employment (Economic theory);

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  1. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
  2. Hamermesh, Daniel S. & Hassink, Wolter H.J. & Ours, Jan C. van, 1994. "Job turnover and labor turnover : a taxonomy of employment dynamics," Serie Research Memoranda 0050, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  3. Steve J. Davis & John Haltiwanger, 1991. "Gross job creation, gross job destruction and employment reallocation," Working Paper Series, Macroeconomic Issues 91-5, Federal Reserve Bank of Chicago.
  4. Christopher L. Foote, 1998. "Trend Employment Growth and the Bunching of Job Creation and Destruction," Harvard Institute of Economic Research Working Papers 1818, Harvard - Institute of Economic Research.
  5. Caballero, R.J., 1990. "A Fallacy Of Composition," Discussion Papers 1990_01, Columbia University, Department of Economics.
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  7. Ricardo J. Caballero & Eduardo Engel & John Haltiwanger, 1996. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," Documentos de Trabajo 6, Centro de Economía Aplicada, Universidad de Chile.
  8. Bertola, G. & Caballero, R.J., 1990. "Kinked Adjustment Costs And Aggregate Dynamics," Discussion Papers 1990_20, Columbia University, Department of Economics.
  9. 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, January.
  10. Jeffrey R. Campbell & Jonas D.M. Fisher, 1996. "Aggregate Employment Fluctuations with Microeconomic Asymmetries," NBER Working Papers 5767, National Bureau of Economic Research, Inc.
  11. Aizcorbe, Ana M, 1992. "Procyclical Labour Productivity, Increasing Returns to Labour and Labour Hoarding in Car Assembly Plant Employment," Economic Journal, Royal Economic Society, vol. 102(413), pages 860-73, July.
  12. Thomas J. Sargent, 1978. "Estimation of dynamic labor demand schedules under rational expectations," Staff Report 27, Federal Reserve Bank of Minneapolis.
  13. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
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  16. Giuseppe Bertola & Richard Rogerson, 1996. "Institutions and Labor Reallocation," NBER Working Papers 5828, National Bureau of Economic Research, Inc.
  17. Caballero, Ricardo J & Hammour, Mohamad L, 1994. "The Cleansing Effect of Recessions," American Economic Review, American Economic Association, vol. 84(5), pages 1350-68, December.
  18. Victor Aguirregabiria & Cesar Alonso-Borrego, 2009. "Labor Contracts and Flexibility: Evidence from a Labor Market Reform in Spain," Working Papers tecipa-346, University of Toronto, Department of Economics.
  19. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  20. Jeffrey R. Campbell, 1997. "Computational Appendix to Entry, Exit, Embodied Technology, and Business Cycles," Technical Appendices campbell98, Review of Economic Dynamics.
  21. Hamermesh, Daniel S, 1989. "Labor Demand and the Structure of Adjustment Costs," American Economic Review, American Economic Association, vol. 79(4), pages 674-89, September.
  22. Jeffrey R. Campbell, 1997. "Entry, Exit, Embodied Technology, and Business Cycles," NBER Working Papers 5955, National Bureau of Economic Research, Inc.
  23. Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186 National Bureau of Economic Research, Inc.
  24. Campbell, J.R., 1995. "Entry, Exit, Technology, and Business Cycles," RCER Working Papers 407, University of Rochester - Center for Economic Research (RCER).
  25. Ricardo J. Caballero & Mohamad L. Hammour, 1994. "On the Timing and Efficiency of Creative Destruction," NBER Working Papers 4768, National Bureau of Economic Research, Inc.
  26. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  27. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  28. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
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  32. repec:fth:coluec:465 is not listed on IDEAS
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  1. > Macroeconomics > Economic Fluctuations > Real Business Cycle Theory > Labor in RBC models
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  1. Quantitative Macroeconomics and Real Business Cycles (QM&RBC)

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