The Cost of Recessions Revisited: A Reverse-Liquidationist View

Ricardo Caballero () and Mohamad L. Hammour

No 7355, NBER Working Papers from National Bureau of Economic Research, Inc

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 and 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.

JEL-codes: E24 E32 (search for similar items in EconPapers)
Date: 1999-09
New Economics Papers: this item is included in nep-his and nep-pke
Note: EFG
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Published as Caballero, Ricardo J. and Mohamad L. Hammour. "The Cost Of Recessions Revisited: A Reverse-Liquidationist View," Review of Economic Studies, 2005, v72(251,Apr), 313-341.

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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 (2001)
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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