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Organizational Capital and Employment Fluctuations

  • Thijs van Rens

    ()

    (Dept of Economics Princeton University)

In this paper I present a model in which production requires two types of labor inputs: regular productive tasks and organizational capital, which is accumulated by workers performing organizational tasks. By allocating more workers from organizational to productive tasks, firms can temporarily increase production without hiring. The availability of this intensive margin of labor adjustment, in combination with adjustment costs along the extensive margin (search frictions, firing costs, training costs), makes it optimal to delay employment adjustments. Simulations indicate that this mechanism is quantitatively important even if only a small fraction of workers perform organizational tasks, and explains why the hiring rate is persistent and why employment is slow to recover after the end of a recession.

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Paper provided by Society for Economic Dynamics in its series 2005 Meeting Papers with number 427.

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Date of creation: 2005
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Handle: RePEc:red:sed005:427
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