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Sectoral Job Creation and Destruction Responses to Oil Price Changes

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Author Info
Steven J. Davis
John Haltiwanger

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Abstract

We study the effects of oil price changes and other shocks on the creation and destruction of U.S. manufacturing jobs from 1972 to 1988. We find that oil shocks account for about 20-25 percent of the cyclical variability in employment growth under our identifying assumptions, twice as much as monetary shocks. Employment growth shows a sharply asymmetric response to oil price ups and downs, in contrast to the prediction of standard equilibrium business cycle models. The two-year employment response to an oil price increase rises (in magnitude) with capital intensity, energy intensity, and product durability. Job destruction shows much greater short-run sensitivity to oil and monetary shocks than job creation in every sector with the clear exception of young, small plants. Oil shocks also generate important reallocative effects. For example, we estimate that job reallocation rose by 11 percent of employment over 3-4 years in response to the 1973 oil shock. More than 80 percent of this response reflects greater job reallocation activity within manufacturing.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7095.

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Date of creation: Apr 1999
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Publication status: published as Davis, Steven J. and John Haltiwanger. "Sectoral Job Creation And Destruction Responses To Oil Prices Changes," Journal of Monetary Economics, 2001, v48(3,Dec), 465-512.
Handle: RePEc:nbr:nberwo:7095

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  3. Mortensen, Dale T., 1994. "The cyclical behavior of job and worker flows," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1121-1142, November. [Downloadable!] (restricted)
  4. Bresnahan, Timothy F & Ramey, Valerie A, 1993. "Segment Shifts and Capacity Utilization in the U.S. Automobile Industry," American Economic Review, American Economic Association, vol. 83(2), pages 213-18, May. [Downloadable!] (restricted)
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  5. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Hamilton, James D, 1988. "A Neoclassical Model of Unemployment and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 593-617, June. [Downloadable!] (restricted)
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  8. Mark Bils & Peter J. Klenow, 1998. "Using Consumer Theory to Test Competing Business Cycle Models," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 233-261, April. [Downloadable!] (restricted)
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  10. Davis, Steven J., 1987. "Fluctuations in the pace of labor reallocation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 27, pages 335-402. [Downloadable!] (restricted)
  11. Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance," American Economic Review, American Economic Association, vol. 83(1), pages 78-98, March. [Downloadable!] (restricted)
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  12. Garey Ramey & Joel Watson, 1996. "Contractual Fragility, Job Destruction and Business Cycles," University of California at San Diego, Economics Working Paper Series 96-22, Department of Economics, UC San Diego. [Downloadable!]
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  13. 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)
  14. Robert H. Rasche & John A. Tatom, 1977. "Energy resources and potential GNP," Review, Federal Reserve Bank of St. Louis, issue Jun, pages 10-24. [Downloadable!]
  15. Mork, Knut Anton, 1989. "Oil and Macroeconomy When Prices Go Up and Down: An Extension of Hamilton's Results," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 740-44, June. [Downloadable!] (restricted)
  16. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June. [Downloadable!] (restricted)
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  17. Caballero, Ricardo J & Hammour, Mohamad L, 1996. "On the Timing and Efficiency of Creative Destruction," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 805-52, August. [Downloadable!] (restricted)
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  18. Friedman, Benjamin M & Kuttner, Kenneth N, 1992. "Money, Income, Prices, and Interest Rates," American Economic Review, American Economic Association, vol. 82(3), pages 472-92, June. [Downloadable!] (restricted)
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