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The cyclical behavior of job creation and job destruction: A sectoral model

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Listed author(s):
  • Jeremy Greenwood

    (Department of Economics, University of Rochester, NY 14627-0156, USA)

  • Glenn M. MacDonald

    (W.E. Simon Graduate School of Business Administration and Department of Economics, University of Rochester, NY 14627-0156, USA)

  • Guang-Jia Zhang

    (Department of Economics, University of Rochester, NY 14627-0156, USA, and Department of Economics, University of Guelph, Guelph N1G 2W1, CANADA)

Abstract

Three key features of the employment process in the U.S. economy are that job creation is procyclical, job destruction is countercyclical, and job creation is less volatile than job destruction. These features are also found at the sectoral (goods and services) level. The paper develops, calibrates and simulates a two-sector general equilibrium model that includes both aggregate and sectoral shocks. The behavior of the model economy mimics the job creation and destruction facts. A non-negligible amount of unemployment arises due to the presence of aggregate and sectoral shocks.

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Article provided by Springer & Society for the Advancement of Economic Theory (SAET) in its journal Economic Theory.

Volume (Year): 7 (1995)
Issue (Month): 1 ()
Pages: 95-112

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Handle: RePEc:spr:joecth:v:7:y:1995:i:1:p:95-112
Note: Received: March 20, 1994; revised version September 12, 1994
Contact details of provider: Web page: http://www.springer.com

Web page: http://saet.uiowa.edu/

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Order Information: Web: http://www.springer.com/economics/economic+theory/journal/199/PS2

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Find related papers by JEL classification:
  • H1 - Public Economics - - Structure and Scope of Government
  • L5 - Industrial Organization - - Regulation and Industrial Policy
  • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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  1. Loungani, Prakash & Rogerson, Richard, 1989. "Cyclical fluctuations and sectoral reallocation : Evidence from the PSID," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 259-273, March.
  2. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
  3. Jeremy Greenwood & Gregory W. Huffman, 1988. "On Modelling the Natural Rate of Unemployment with Indivisible Labour," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 587-609, August.
  4. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-793, August.
  5. Jean-Pierre DANTHINE & John B. DONALDSON, 1993. "Computing Equilibria of Non-Optimal Economies," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9306, Université de Lausanne, Faculté des HEC, DEEP.
  6. Hansen, Gary D & Imrohoroglu, Ayse, 1992. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 118-142, February.
  7. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, July.
  8. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
  9. Rogerson, Richard & Wright, Randall, 1988. "Involuntary unemployment in economies with efficient risk sharing," Journal of Monetary Economics, Elsevier, vol. 22(3), pages 501-515.
  10. John M. Barron & Wesley Mellow, 1979. "Search Effort in the Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 14(3), pages 389-404.
  11. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-132, March.
  12. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  13. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
  14. Gary D. Hansen & Randall Wright, 1992. "The labor market in real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 2-12.
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