Discussion Paper
Aggregate employment fluctuations with microeconomic asymmetries
Abstract: We provide a simple explanation for the observation that the variance of job destruction is greater than the variance of job creation: job creation is costlier at the margin than job destruction. As Caballero [2] has argued, asymmetric employment adjustment costs at the establishment level need not imply asymmetric volatility of aggregate job flows. We construct an equilibrium model in which (S,s)-type employment policies respond endogenously to aggregate shocks. The microeconomic asymmetries in the model can dampen the response of total job creation to an aggregate shock and cause it to be less volatile than total job destruction. This is so even though aggregate shocks are symmetrically distributed.
Keywords: Downsizing of organizations; Employment (Economic theory);
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Bibliographic Information
Provider: Federal Reserve Bank of Minneapolis
Part of Series: Discussion Paper / Institute for Empirical Macroeconomics
Publication Date: 1996
Number: 112