The cyclical behavior of job creation and job destruction: A sectoral model
Jeremy Greenwood (),
Glenn MacDonald () and
Guang-Jia Zhang Additional contact information Guang-Jia Zhang: Department of Economics, University of Rochester, NY 14627-0156, USA, and Department of Economics, University of Guelph, Guelph N1G 2W1, CANADA
Three key features of the employment process in the U.S. economy are that job creation is procyclical, job destruction is countercyclical, and job creation is less volatile than job destruction. These features are also found at the sectoral (goods and services) level. The paper develops, calibrates and simulates a two-sector general equilibrium model that includes both aggregate and sectoral shocks. The behavior of the model economy mimics the job creation and destruction facts. A non-negligible amount of unemployment arises due to the presence of aggregate and sectoral shocks.