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Aggregate Employment Fluctuations with Microeconomic Asymmetries

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

We provide a simple explanation for the observation from the U.S. manufacturing sector that the job destruction rate fluctuates more than the job creation rate. In our model, proportional plant-level costs of creating and destroying jobs cause shrinking plants to be more sensitive to aggregate shocks than growing plants. We describe circumstances in which this microeconomic asymmetry is preserved in the aggregate and show that it can account for much of the observed asymmetries in gross job flows. This is so even though we abstract from job matching frictions, incomplete contracts, and aggregate congestion effects.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.90.5.1323
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 90 (2000)
Issue (Month): 5 (December)
Pages: 1323-1345

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Handle: RePEc:aea:aecrev:v:90:y:2000:i:5:p:1323-1345
Note: DOI: 10.1257/aer.90.5.1323
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  1. Matthew D. Shapiro, 1984. "The Dynamic Demand for Capital and Labor," Cowles Foundation Discussion Papers 735, Cowles Foundation for Research in Economics, Yale University.
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  9. Jonas D. M. Fisher & Jeffrey R. Campbell, 2000. "Aggregate Employment Fluctuations with Microeconomic Asymmetries," American Economic Review, American Economic Association, vol. 90(5), pages 1323-1345, December.
  10. Thomas J. Sargent, 1978. "Estimation of dynamic labor demand schedules under rational expectations," Staff Report 27, Federal Reserve Bank of Minneapolis.
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  29. repec:dgr:vuarem:1994-50 is not listed on IDEAS
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