The Cost of Recessions Revisited: A Reverse-Liquidationist View

Ricardo Caballero () and Mohamad L. Hammour

DELTA Working Papers from DELTA (Ecole normale supérieure)

Abstract: The observation that liquidations are concentrated in recessions has long been the subject of controversy. One view holds that liquidations are beneficial in that they result in increased restructuring. Another view holds that liquidations are privately inefficient and essentially wasteful. This paper proposes an alternative perspective. Based on a combination of theory with empirical evidence on gross job flows and on financial and labor market rents, we find that, cumulatively, recessions result in reduced restructuring, and that this is likely to be socially costly once we consider inefficiencies on both the creation and destruction margins.

Keywords: LABOUR; CAPITAL; PRODUCTION (search for similar items in EconPapers)
JEL-codes: E29 L23 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2001
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Related works:
Journal Article: The Cost of Recessions Revisited: A Reverse-Liquidationist View (2005)
Working Paper: The Cost of Recessions Revisited: A Reverse-Liquidationist View (1999)
Working Paper: The Cost of Recessions Revisited: A Reverse-Liquidationist View (1999)
Working Paper: The Cost of Recessions Revisited: A Reverse-Liquidationist View (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:del:abcdef:2001-05

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