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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: job creation is costlier at the margin than job destruction. As Caballero [2] has argued, asymmetric employment adjustment costs at the establishment level need not imply asymmetric volatility of aggregate job flows. We construct an equilibrium model in which (S,s)-type employment policies respond endogenously to aggregate shocks. The microeconomic asymmetries in the model can dampen the response of total job creation to an aggregate shock and cause it to be less volatile than total job destruction. This is so even though aggregate shocks are symmetrically distributed.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5767.

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Date of creation: Sep 1996
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Publication status: published as Campbell, J. R. and J. D. M. Fisher. "Aggregate Employment Fluctuations With Microeconomic Asymmetries," American Economic Review, 2000, v90(5,Dec), 1323-1345.
Handle: RePEc:nbr:nberwo:5767

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  2. 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.
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  1. > Macroeconomics > Economic Fluctuations > Real Business Cycle Theory > Labor in RBC models
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