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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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File URL: http://socserv.mcmaster.ca/econ/rsrch/papers/archive/2002-03.pdf
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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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  1. 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.
  2. Caballero, Ricardo J, 1992. "A Fallacy of Composition," American Economic Review, American Economic Association, vol. 82(5), pages 1279-92, December.
  3. Rosen, Sherwin, 1972. "Learning by Experience as Joint Production," The Quarterly Journal of Economics, MIT Press, vol. 86(3), pages 366-82, August.
  4. Boyan Jovanovic & Peter L. Rousseau, 2001. "Vintage Organization Capital," NBER Working Papers 8166, National Bureau of Economic Research, Inc.
  5. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September.
  6. Russell W. Cooper & Jonathan L. Willis, 2001. "The Economics of Labor Adjustment: Mind the Gap," NBER Working Papers 8527, National Bureau of Economic Research, Inc.
  7. Russell Cooper & Alok Johri, 1999. "Learning by Doing and Aggregate Fluctuations," NBER Working Papers 6898, National Bureau of Economic Research, Inc.
  8. Jeffrey R. Campbell & Jonas D.M. Fisher, 1996. "Aggregate Employment Fluctuations with Microeconomic Asymmetries," NBER Working Papers 5767, National Bureau of Economic Research, Inc.
  9. 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.
  10. 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.
  11. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-61, June.
  12. Andrew Atkeson & Patrick J. Kehoe, 2002. "Measuring Organization Capital," NBER Working Papers 8722, National Bureau of Economic Research, Inc.
  13. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  14. 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.
  15. 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, June.
  16. Ricardo J. Caballero & Eduardo M.R.A. Engel, 1992. "Microeconomic Adjustment Hazards and Aggregate Dynamics," NBER Working Papers 4090, National Bureau of Economic Research, Inc.
  17. Giuseppe Bertola & Ricardo J. Caballero, 1990. "Kinked Adjustment Costs and Aggregate Dynamics," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 237-296 National Bureau of Economic Research, Inc.
  18. Christopher L. Foote, 1998. "Trend Employment Growth And The Bunching Of Job Creation And Destruction," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 809-834, August.
  19. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  20. Dumas, Bernard, 1991. "Super contact and related optimality conditions," Journal of Economic Dynamics and Control, Elsevier, vol. 15(4), pages 675-685, October.
  21. Daniel S. Hamermesh, 1993. "Labor Demand and the Source of Adjustment Costs," NBER Working Papers 4394, National Bureau of Economic Research, Inc.
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