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Asymmetric Labor Adjustment, Organizational Capital and Aggregate Job Flows

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Author Info
Fransisco M. Ganzalez
Alok Johri

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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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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
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Handle: RePEc:mcm:deptwp:2002-03

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E00 - Macroeconomics and Monetary Economics - - General - - - General
J00 - Labor and Demographic Economics - - General - - - General

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  1. Caballero, Ricardo J & Engel, Eduardo M R A & Haltiwanger, John, 1997. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," American Economic Review, American Economic Association, vol. 87(1), pages 115-37, March. [Downloadable!] (restricted)
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  2. Caballero, Ricardo J & Engel, Eduardo M R A, 1993. "Microeconomic Adjustment Hazards and Aggregate Dynamics," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 359-83, May. [Downloadable!] (restricted)
    Other versions:
  3. Christopher L. Foote, 1998. "Trend Employment Growth And The Bunching Of Job Creation And Destruction," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 809-834, August. [Downloadable!] (restricted)
    Other versions:
  4. Rosen, Sherwin, 1972. "Learning by Experience as Joint Production," The Quarterly Journal of Economics, MIT Press, vol. 86(3), pages 366-82, August. [Downloadable!] (restricted)
  5. Caballero, Ricardo J, 1992. "A Fallacy of Composition," American Economic Review, American Economic Association, vol. 82(5), pages 1279-92, December. [Downloadable!] (restricted)
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  6. Russell Cooper & Jonathan L. Willis, 2001. "The economics of labor adjustment : mind the gap," Research Working Paper RWP 01-06, Federal Reserve Bank of Kansas City. [Downloadable!]
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  7. C. Lanier Benkard, 2000. "Learning and Forgetting: The Dynamics of Aircraft Production," American Economic Review, American Economic Association, vol. 90(4), pages 1034-1054, September. [Downloadable!] (restricted)
  8. R Cooper & Alok Johri, 2000. "Learning by Doing and Aggregate Fluctuations," Department of Economics Working Papers 2000-02, McMaster University. [Downloadable!]
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  9. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Blackwell Publishing, vol. 57(3), pages 381-402, July. [Downloadable!] (restricted)
  10. Bertola, G. & Caballero, R.J., 1990. "Kinked Adjustment Costs And Aggregate Dynamics," Discussion Papers 1990_20, Columbia University, Department of Economics.
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  11. Boyan Jovanovic & Peter L. Rousseau, 2001. "Vintage Organization Capital," NBER Working Papers 8166, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Jeffrey R. Campbell & Jonas D. M. Fisher, 2000. "Aggregate Employment Fluctuations with Microeconomic Asymmetries," American Economic Review, American Economic Association, vol. 90(5), pages 1323-1345, December. [Downloadable!] (restricted)
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  13. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September. [Downloadable!] (restricted)
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  14. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Blackwell Publishing, vol. 62(1), pages 53-82, January. [Downloadable!] (restricted)
  15. Dumas, Bernard, 1991. "Super contact and related optimality conditions," Journal of Economic Dynamics and Control, Elsevier, vol. 15(4), pages 675-685, October. [Downloadable!] (restricted)
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  17. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-61, June. [Downloadable!] (restricted)
  18. Andrew Atkeson & Patrick J. Kehoe, 2002. "Measuring Organization Capital," NBER Working Papers 8722, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  19. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October. [Downloadable!] (restricted)
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  20. 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. [Downloadable!]
  21. 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.
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