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On the Driving Forces behind Cyclical Movements in Employment and Job Reallocation

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  • John Haltiwanger
  • Steven J. Davis

Abstract

Theory restricts short-run job creation and destruction responses and cumulative employment and job reallocation responses to allocative and aggregate shocks. We formulate these restrictions and implement them for postwar data on U.S. manufacturing. Allocative shocks are the main driving force behind cyclical movements in job reallocation, but their contribution to employment fluctuations varies greatly across alternative identification assumptions. Also, the data compel one or both of the following inferences: aggregate shocks greatly alter the shape and not just the mean of the cross-sectional density of employment growth rates; allocative shocks cause short-run reductions in aggregate employment.

Suggested Citation

  • John Haltiwanger & Steven J. Davis, 1999. "On the Driving Forces behind Cyclical Movements in Employment and Job Reallocation," American Economic Review, American Economic Association, vol. 89(5), pages 1234-1258, December.
  • Handle: RePEc:aea:aecrev:v:89:y:1999:i:5:p:1234-1258
    Note: DOI: 10.1257/aer.89.5.1234
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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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