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Plant Life Cycle and Aggregate Employment Dynamics

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Author Info
Min Ouyang () (Department of Economics, University of California-Irvine)

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Abstract

Past empirical studies have repeatedly found the link between plant life cycle and aggregate employment dynamics: cross-section aggregate employment dynamics differ significantly by plant age. Interestingly, the dynamics of plant-level productivity distribution also display a strong age pattern. This paper develops a model of plant life cycle with demand fluctuations, to capture both of these empirical regularities. We model plants to differ by vintage, and an idiosyncratic component that is not directly observable, but can be learned over time. We show that this model, developed to match the observed dynamics of plant-level productivity distribution, introduces two driving forces for job flows: learning and creative destruction. The resulting job flows can match, both qualitatively and quantitatively, the differences between young and old plants in their job-flow magnitude and cyclical responses observed in the U.S. manufacturing sector.

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File URL: http://www.economics.uci.edu/docs/2005-06/Ouyang-32.pdf
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Publisher Info
Paper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 050632.

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Length: 36 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:irv:wpaper:050632

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Postal: Irvine, CA 92697-3125
Phone: (949) 824-5788
Web page: http://www.econ.uci.edu/
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Related research
Keywords: Plant life cycle Employment dynamics Heterogeneous employers Job creation Job destruction Productivity dynamics Demand fluctuations

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis

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