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Asymmetric Labor Adjustment, Organizational Capital and Aggregate Job Flows

  • Fransisco M. Ganzalez
  • Alok Johri

This paper illustrates how the destruction of firm-specific organizational capital associated with changes in firm-level employment can influence the behavior of ag- gregate job flows, even in the presence of heterogeneity across rms and even in the absence of aggregate shocks. Our analysis highlights the potential importance of the distinction between adjustment costs that are associated with a loss of output (output-costs of labor adjustment) and those associated with a loss of organizational capital (OC-costs of labor adjustment). In particular, the analysis indicates how this link between organizational capital and labor demand can shape the behavior of net employment growth and gross job reallocation when conventional hiring and bring costs of adjustment may be unable to do so.

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Paper provided by McMaster University in its series Department of Economics Working Papers with number 2002-03.

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Length: 61 pages
Date of creation: Mar 2002
Date of revision:
Handle: RePEc:mcm:deptwp:2002-03
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  8. 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.
  9. Andrew Atkeson & Patrick J. Kehoe, 2002. "Measuring Organization Capital," NBER Working Papers 8722, National Bureau of Economic Research, Inc.
  10. Russell Cooper & Alok Johri, 1999. "Learning by Doing and Aggregate Fluctuations," NBER Working Papers 6898, National Bureau of Economic Research, Inc.
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  12. Dumas, Bernard, 1991. "Super contact and related optimality conditions," Journal of Economic Dynamics and Control, Elsevier, vol. 15(4), pages 675-685, October.
  13. Ricardo J. Caballero & Eduardo Engel & John Haltiwanger, 1996. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," Documentos de Trabajo 6, Centro de Economía Aplicada, Universidad de Chile.
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  15. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  16. Boyan Jovanovic & Peter L. Rousseau, 2000. "Vintage organization capital," Proceedings, Federal Reserve Bank of San Francisco, issue Apr.
  17. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-61, June.
  18. Caballero, Ricardo J, 1992. "A Fallacy of Composition," American Economic Review, American Economic Association, vol. 82(5), pages 1279-92, December.
  19. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 381-402.
  20. C. Lanier Benkard, 2000. "Learning and Forgetting: The Dynamics of Aircraft Production," American Economic Review, American Economic Association, vol. 90(4), pages 1034-1054, September.
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