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Working Paper
Job-hopping in Silicon Valley: some evidence concerning the micro-foundations of a high technology cluster
In Silicon Valley's computer cluster, skilled employees are reported to move rapidly between competing firms. If true, this job-hopping facilitates the reallocation of resources towards firms with superior innovations, but it also creates human capital externalities that reduce incentives to invest in new knowledge. Outside of California, employers can use non-compete agreements to reduce mobility costs, but these agreements are unenforceable under California law. Until now, the claim of "hyper-mobility" of workers in Silicon has not been rigorously investigated. Using new data on labor ...
Working Paper
Employer-to-employer flows in the U.S. labor market: the complete picture of gross worker flows
Despite the importance of employer-to-employer (EE) flows to our understanding of labor market and business cycle dynamics, the literature has lacked a comprehensive and representative measure of the size and character of these flows. To construct the first reliable measures of EE flows for the United States, this paper exploits the "dependent interviewing" techniques introduced in the Current Population Survey in 1994. The paper concludes that EE flows are large: On average 2.6 percent of employed persons change employers each month, a flow more than twice as large as that from employment ...
Working Paper
From many series, one cycle: improved estimates of the business cycle from a multivariate unobserved components model
We construct new estimates of potential output and the output gap using a multivariate approach that allows for an explicit role for measurement errors in the decomposition of real output. Because we include data on hours, output, employment, and the labor force, we are able to decompose our estimate of potential output into separate trends in labor productivity, labor-force participation, weekly hours, and the NAIRU. We find that labor-market variables?especially the unemployment rate?are the most informative individual indicators of the state of the business cycle. Conditional on including ...
Working Paper
The GMM parameter normalization puzzle
A feature of GMM estimation--the use of a consistent estimate of the optimal weighting matrix rather than the joint estimation of the model parameters and the weighting matrix--can lead to the sensitivity of GMM estimation to the choice of parameter normalization. In many applications, including Euler equation estimation, a model parameter multiplies the equation error in some, but not all, normalizations. But, conventional GMM estimators that either hold the estimate of the weighting matrix fixed or allow some limited iteration on the weighting matrix fail to account for the dependence of ...
Working Paper
The importance of employer-to-employer flows in the U.S. labor market
In order to measure the flexibility of the labor market, evaluate the job-worker matching process, and model business-cycle dynamics, economists have studied the flows of workers across the labor market states of employment, unemployment, and not in the labor force. One important flow that has been poorly measured is the movement of workers from one employer to another without any significant intervening period of nonemployment. This paper exploits the "dependent interviewing" techniques used in the Current Population Survey since 1994 to estimate such flows. We find that they are large, ...
Working Paper
The causes of business cycles and the cyclicality of real wages
A model's ability to explain procyclical movements in real wages has become an important benchmark by which macroeconomists judge business cycle theories. Because Keynesian models with sticky nominal wages predict countercyclical real wages, they have been criticized and dismissed in favor of Real Business Cycle models or New Keynesian models based on price stickiness or countercyclical markups. The bulk of the evidence for procyclical real wages, however, comes from studies using panel data that estimate the unconditional, contemporaneous correlation between real wages and the unemployment ...
Working Paper
Employment persistence
The recent U.S. expansion has provided employment experience to individuals at tail of the skill distribution. Will these opportunities bestow persistent benefits in the form of greater future employability? Using synthetic cohorts constructed from the CPS, this paper estimates the degree of persistence in cohort-level employment rates in excess of persistence in aggregate macroeconomic conditions. This approach is in some ways superior to testing for hysteresis in the aggregate unemployment rate because it abstracts away from compositional changes in the labor force by focusing on particular ...
Working Paper
The endogeneity of employment adjustment costs: the tradeoff between efficiency and flexibility
This paper models a firm's choice of employment adjustment costs as one component of its choice of production process. In making a one-time choice of production process, firms tradeoff increased flexibility--the reduced cost of changing levels of production--against the diminished efficiency of producing a given level of output. The model predicts that firms facing greater volatility in expected employment choose production processes that entail relatively low costs of adjusting employment. Using estimates of adjustment costs and employment volatility for four-digit manufacturing industries, ...