Aggregate employment fluctuations with microeconomic asymmetries

Jeffrey Campbell and Jonas Fisher

No WP-96-17, Working Paper Series, Macroeconomic Issues from Federal Reserve Bank of Chicago

Abstract: We provide a simple explanation for the observation that the variance of job destruction is greater than the variance of job creation. In our model profit maximization in the presence of proportional plant-level costs of job creation and destruction implies that shrinking plants are more sensitive than growing plants to aggregate shocks. We describe circumstances in which this microeconomic asymmetry is preserved in the aggregate and show that it can account for asymmetries in the variability of job creation and destruction of the kind observed in the U.S. manufacturing sector. This is so even though we abstract from job search and matching frictions, incomplete contracts, and aggregate congestion effects, all of which have been put forward as important for understanding the job creation and destruction evidence.

Keywords: Downsizing of organizations; Employment (Economic theory) (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Aggregate Employment Fluctuations with Microeconomic Asymmetries (2000)
Working Paper: Aggregate employment fluctuations with microeconomic asymmetries (1996)
Working Paper: Aggregate Employment Fluctuations with Microeconomic Asymmetries (1996)
Working Paper: Aggreagate Employment Fluctuations with Microeconomic Asymmetries (1996)
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