Idiosyncratic Risk and Aggregate Employment Dynamics

Jeffrey Campbell and Jonas Fisher

Review of Economic Dynamics, 2004, vol. 7, issue 2, 331-353

Abstract: This paper studies how idiosyncratic productivity risk impacts aggregate employment dynamics when there is a trade-off between workers' productivity and costs of job creation and destruction. In our analysis, increasing idiosyncratic risk induces a producer to move workers out of structured jobs that are costly to create and destroy and towards less-productive but more-flexible unstructured positions. This substitution leaves the producer's total employment more responsive to both idiosyncratic and aggregate disturbances. If all of an industry's producers respond to heightened idiosyncratic risk in this way, then industry-wide employment can respond more to a given aggregate shock. We apply this insight to connect differences between young and old manufacturing plants' aggregate employment dynamics with their corresponding differences in idiosyncratic variability. (Copyright: Elsevier)

Keywords: Idiosyncratic Risk; Plant Life Cycle; Employment Dynamics; Adjustment Costs (search for similar items in EconPapers)
JEL-codes: E00 J00 L00 (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
http://dx.doi.org/10.1016/S1094-2025(03)00057-7 Full text (application/pdf)
Access to full texts is restricted to ScienceDirect subscribers and ScienceDirect institutional members. See http://www.sciencedirect.com/ for details.

Related works:
Working Paper: Idiosyncratic risk and aggregate employment dynamics (2000)
Working Paper: Idiosyncratic Risk and Aggregate Employment Dynamics (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:issued:v:7:y:2004:i:2:p:331-353

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/S1094-2025(03)00057-7

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().