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Organizational Flexibility and Employment Dynamics at Young and Old Plants

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

Abstract

There are significant differences in the dynamics of employment over the business cycle between young and old manufacturing plants. Young plants are more sensitive to aggregate disturbances, and they respond to them along different margins. We interpret these differences as reflecting greater organizational flexibility at young plants due to the changing nature of a plant's environment as it ages. In the presence of aggregate uncertainty, differences between young and old plants' organizational flexibility allows the model to reproduce their distinct cyclical characteristics. Previous empirical studies show that small firms generally respond by more to aggregate shocks than do large firms. To the extent that small firms tend to operate young plants, our analysis suggests an alternative to conventional explanations of this evidence which appeal to imperfections in credit markets.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6809.

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Date of creation: Nov 1998
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Handle: RePEc:nbr:nberwo:6809

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  1. Jeffrey R. Campbell & Jonas D.M. Fisher, 1996. "Aggregate Employment Fluctuations with Microeconomic Asymmetries," NBER Working Papers 5767, National Bureau of Economic Research, Inc.
  2. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, American Economic Association, vol. 80(3), pages 511-28, June.
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  5. Fisher, Jonas D M, 1999. "Credit Market Imperfections and the Heterogeneous Response of Firms to Monetary Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 31(2), pages 187-211, May.
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Cited by:
  1. Kilponen , Juha & Vanhala, Juuso, 2009. "Productivity and job flows: Heterogeneity of new hires and continuing jobs in the business cycle," Research Discussion Papers, Bank of Finland 15/2009, Bank of Finland.
  2. Guiso, L. & Schivardi, F., 2000. "Information Spillovers and Factor Adjustment," Papers, Banca Italia - Servizio di Studi 368, Banca Italia - Servizio di Studi.
  3. Maliranta, Mika, 2002. "From R&D to Productivity Through Micro-Level Restructuring," Discussion Papers, The Research Institute of the Finnish Economy 795, The Research Institute of the Finnish Economy.
  4. Jeffrey R. Campbell & Jonas D.M. Fisher, 2000. "Idiosyncratic risk and aggregate employment dynamics," Working Paper Series, Federal Reserve Bank of Chicago WP-00-15, Federal Reserve Bank of Chicago.
  5. WenLi Li & Pierre-Daniel Sarte, 2000. "Investigating fluctuations in U.S. manufacturing : what are the direct effects of informational frictions?," Working Paper, Federal Reserve Bank of Richmond 00-01, Federal Reserve Bank of Richmond.
  6. Li, Wenli & Sarte, Pierre-Daniel G., 2003. "Credit market frictions and their direct effects on U.S. manufacturing fluctuations," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 28(3), pages 419-443, December.

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