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Organizational capital and employment fluctuations

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  • Thijs van Rens

Abstract

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.

Suggested Citation

  • Thijs van Rens, 2004. "Organizational capital and employment fluctuations," Economics Working Papers 944, Department of Economics and Business, Universitat Pompeu Fabra.
  • Handle: RePEc:upf:upfgen:944
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    Cited by:

    1. Mary C. Daly & Bart Hobijn & Robert G. Valletta, 2011. "The recent evolution of the natural rate of unemployment," Working Paper Series 2011-05, Federal Reserve Bank of San Francisco.
    2. Michael W. L. Elsby & Bart Hobijn & Aysegul Sahin, 2010. "The Labor Market in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(1 (Spring), pages 1-69.
    3. Otsu, Keisuke & Saito, Masashi, 2013. "Organizational dynamics and aggregate fluctuations: The role of financial relationships," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 3044-3058.
    4. Edward P. Lazear & Kathryn L. Shaw & Christopher Stanton, 2013. "Making Do With Less: Working Harder during Recessions," NBER Chapters,in: Labor Markets in the Aftermath of the Great Recession, pages 333-360 National Bureau of Economic Research, Inc.
    5. McKay, Alisdair & Reis, Ricardo, 2008. "The brevity and violence of contractions and expansions," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 738-751, May.
    6. Lazear, Edward P. & Shaw, Kathryn L. & Stanton, Christopher, 2014. "Making do with less: working harder during recessions," LSE Research Online Documents on Economics 59066, London School of Economics and Political Science, LSE Library.
    7. Lazear, Edward P. & Shaw, Kathryn L. & Stanton, Christopher, 2014. "Making do with less: working harder during recessions," LSE Research Online Documents on Economics 60617, London School of Economics and Political Science, LSE Library.
    8. Edward P. Lazear & Kathryn L. Shaw & Christopher Stanton, 2014. "Making Do With Less: Working Harder During Recessions," CEP Discussion Papers dp1321, Centre for Economic Performance, LSE.
    9. David Berger, 2012. "Countercyclical Restructuring and Jobless Recoveries," 2012 Meeting Papers 1179, Society for Economic Dynamics.
    10. Mary Daly & Bart Hobijn & Aysegul Sahin & Robert Valletta, 2011. "A Rising Natural Rate of Unemployment: Transitory or Permanent?," Tinbergen Institute Discussion Papers 11-160/3, Tinbergen Institute.

    More about this item

    Keywords

    Business cycles; labor market; organizational capital; jobless recoveries;

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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