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Aggregate Employment Fluctuations with Microeconomic Asymmetries

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

We provide a simple explanation for the observation that the variance of job destruction is greater than the variance of job creation: job creation is costlier at the margin than job destruction. As Caballero [2] has argued, asymmetric employment adjustment costs at the establishment level need not imply asymmetric volatility of aggregate job flows. We construct an equilibrium model in which (S,s)-type employment policies respond endogenously to aggregate shocks. The microeconomic asymmetries in the model can dampen the response of total job creation to an aggregate shock and cause it to be less volatile than total job destruction. This is so even though aggregate shocks are symmetrically distributed.

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File URL: http://www.nber.org/papers/w5767.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5767.

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Date of creation: Sep 1996
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Publication status: published as Campbell, J. R. and J. D. M. Fisher. "Aggregate Employment Fluctuations With Microeconomic Asymmetries," American Economic Review, 2000, v90(5,Dec), 1323-1345.
Handle: RePEc:nbr:nberwo:5767
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  1. Mortensen, Dale T., 1994. "The cyclical behavior of job and worker flows," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1121-1142, November.
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  8. Sargent, Thomas J, 1978. "Estimation of Dynamic Labor Demand Schedules under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1009-44, December.
  9. Jeffrey R. Campbell & Jonas D.M. Fisher, 1998. "Aggregate employment fluctuations with microeconomic asymmetries," Working Paper Series, Macroeconomic Issues WP-96-17, Federal Reserve Bank of Chicago.
  10. Aizcorbe, Ana M, 1992. "Procyclical Labour Productivity, Increasing Returns to Labour and Labour Hoarding in Car Assembly Plant Employment," Economic Journal, Royal Economic Society, vol. 102(413), pages 860-73, July.
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  14. Ricardo J. Caballero, 1991. "A Fallacy of Composition," NBER Working Papers 3735, National Bureau of Economic Research, Inc.
  15. Campbell, J.R., 1995. "Entry, Exit, Technology, and Business Cycles," RCER Working Papers 407, University of Rochester - Center for Economic Research (RCER).
  16. 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.
  17. 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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  23. Jeffrey R. Campbell, 1997. "Computational Appendix to Entry, Exit, Embodied Technology, and Business Cycles," Technical Appendices campbell98, Review of Economic Dynamics.
  24. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
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  29. Benveniste, L M & Scheinkman, J A, 1979. "On the Differentiability of the Value Function in Dynamic Models of Economics," Econometrica, Econometric Society, vol. 47(3), pages 727-32, May.
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