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Asymmetric Labor Adjustment, Organizational Capital and Aggregate Job Flows

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  • Fransisco M. Ganzalez
  • Alok Johri

Abstract

This paper illustrates how the destruction of firm-specific organizational capital associated with changes in firm-level employment can influence the behavior of ag- gregate job flows, even in the presence of heterogeneity across rms and even in the absence of aggregate shocks. Our analysis highlights the potential importance of the distinction between adjustment costs that are associated with a loss of output (output-costs of labor adjustment) and those associated with a loss of organizational capital (OC-costs of labor adjustment). In particular, the analysis indicates how this link between organizational capital and labor demand can shape the behavior of net employment growth and gross job reallocation when conventional hiring and bring costs of adjustment may be unable to do so.

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File URL: http://socserv.mcmaster.ca/econ/rsrch/papers/archive/2002-03.pdf
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Bibliographic Info

Paper provided by McMaster University in its series Department of Economics Working Papers with number 2002-03.

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Length: 61 pages
Date of creation: Mar 2002
Date of revision:
Handle: RePEc:mcm:deptwp:2002-03

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  19. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 62(1), pages 53-82, January.
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