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Firms' relative sensitivity to aggregate shocks and the dynamics of gross job flows

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  • Eugenio P. Pinto

Abstract

We propose a measure for the importance of aggregate shocks for fluctuations in job flows at the firm level. Using data for the Portuguese economy, we find that large and old firms exhibit higher relative sensitivity to aggregate shocks and have a disproportional influence over the dynamics of aggregate job reallocation. In the overall economy, since large and old firms reallocate jobs less procyclically than small and young firms, job reallocation is less procyclical than if firm size and age classes were equally sensitive to aggregate shocks. A similar result applies in the manufacturing and the transportation and public utilities sectors. However, in the services and retail trade sectors the reallocation patterns are more similar across firm size and age, likely reflecting the expansion of existing and the creation of new industries. We conclude that large and old firms seem relatively more important to assess the state of the business cycle.

Suggested Citation

  • Eugenio P. Pinto, 2009. "Firms' relative sensitivity to aggregate shocks and the dynamics of gross job flows," Finance and Economics Discussion Series 2009-02, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2009-02
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    References listed on IDEAS

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    6. Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters,in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186 National Bureau of Economic Research, Inc.
    7. Wenli Li & John Weinberg, 2003. "Firm-Specific Learning and the Investment Behavior of Large and Small Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 599-625, May.
    8. Jeffrey R. Campbell & Jonas D. M. Fisher, 2004. "Idiosyncratic Risk and Aggregate Employment Dynamics," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 331-353, April.
    9. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier.
    10. Boeri, Tito, 1996. "Is Job Turnover Countercyclical?," Journal of Labor Economics, University of Chicago Press, vol. 14(4), pages 603-625, October.
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    Keywords

    Labor market ; Employment (Economic theory);

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