This paper presents a model that generates procyclical search, procyclical labor productivity, and countercyclical unemployment broadly consistent with the actual behavior of these time series. Concretely, the model introduces an aggregate shock into the sectoral demand-shift model of the type analyzed by Lucas and Prescott. If aggregate shocks operate multiplicatively and are autocorrelated, the payoff to unemployed search can be procyclical to an extent large enough to offset the productive losses associated with search that also are procyclical.

The Demography of Corporations and Industries (2000) by Glenn R. Carroll and T. Michael Hannan is a welcome addition to a body of empirical analysis of firms and industries that studies the effects of technological change and other changes that occur over time. The book contains a wealth of facts, and some new insights too. It will make useful secondary reading in some graduate courses in economics, and I would recommend it to anyone whose research relates to the concept of creative destruction.

Motivated by the observed rise in the trade of technology, I analyse how technology would spread in a frictionless market. In such a world, low-skilled agents prefer to use old technology because it costs less; their skills do not justify the use of frontier technology. The model generates a technology-life cycle of somewhere between 68 and 124 years and per-capita income differential factors between 2.3 and 4.5. The model matches fairly well the cross-section relation between a country's income per capita and the average age of the technologies that its residents use. It is also consistent with aspects of the observed positive relation between income and imports of technology.

I estimate a model in which new technology entails random adjustment needs. Rapid adjustments may cause measured productivity to decline. The slowdowns persist because adjustment is costly and, hence, protracted. The model explains both the “steepness ” and the “deepness ” asymmetry of cycles. Adjustment costs amount to about 14 percent of output, and technological inefficiency to about 28 percent. Firms abandon technologies long before they are perfected — current-practice TFP is 20 percent below its maximal level.

The paper presents a "micro " shock explanation of aggregate risk. Shocks are independent over agents, and equilibria are always unique. It is shown that any amount of aggregate risk can be generated by games in which shocks to players are independent. Explicit examples are given, some of which elaborate on examples in the literature. Implications are drawn for factor-analytic methods of extracting aggregate shocks. I.

Journal Article Favorable Selection with Asymmetric Information Get access Boyan Jovanovic Boyan Jovanovic Bell Laboratories Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 97, Issue 3, August 1982, Pages 535–539, https://doi.org/10.2307/1885876 Published: 01 August 1982

Economic models with multiple equilibria are now so common in economics that we need a general framework for statistical inference in such models. This note offers a simple theoretical framework that can be used to organize the debate about the question of whether such a model is identified, and about the question of how much predictive content it retains

Recent evidence shows that within an industry, smaller firms grow faster and are more likely to fail than large firms. This paper provides a theory of selection with incomplete information that is consistent with these and other findings. Firms learn about their efficiency as they operate in the industry. The efficient grow and survive; the inefficient decline and fail. A perfect foresight equilibrium is proved by means of showing that it is a unique maximum to discounted net surplus. The maximization problem is not standard, and some mathematical results might be of independent interest. 1. THEORY AND EVIDENCE ON THE GROWTH AND SURVIVAL OF FIRMS Do SMALL FIRMS grow faster than large firms? Are they less likely to survive? Early studies found no relation between the size of firms and their growth rates [8, 14, 16]. The growth of firms seemed to be proportional to their size. In later work, adjustment costs with constant returns to scale were shown to imply that firms should grow in proportion to their size [10, 11]. Recent evidence from larger samples tells a different story. Mansfield [13] finds that smaller firms have higher and more variable growth rates. Du Rietz [6], in a sample of Swedish firms, again finds that smaller firms grow faster, and that they are less likely to survive [6,8,13]. These findings conflict with the adjustment costs theory in which all firms grow at the same rate, and in which failure does not happen. To explain these deviations from the proportional growth law, I propose a theory of noisy selection. Efficient firms grow and survive; inefficient firms decline and fail. Firms differ in size not because of the fixity of capital, but because some discover that they are more efficient than others. The model gives rise to entry, growth, and exit behavior that agrees, broadly, with the evidence. The model also agrees with some more tentative findings. First, firm size and concentration seem to be positively related to rates of return.2 Second, the correlation over time of rates of return is higher for larger firms and in the concentrated industries [15, 17]. Third, the variability of rates of return at a point in time is higher in the concentrated industries [17]. Finally, higher concentration is associated with higher profits for the larger firms, but not for the smaller firms

This paper models growth via on-the-job learning when firms and workers are heterogeneous. It is an overlapping generations model in which young agents match with the old. More efficient assignments lead to faster long-run growth, more inequality, and less turnover in the distribution of human capital. Constant-growth paths are characterized for general functional forms and then, for the Cobb-Douglas case, the transition dynamics are solved analytically when the skill of the young is log-normally distributed and the initial human capital of the old generation is also log-normal. Growth and inequality move together on the transition to the balanced growth path.

This paper examines three influential papers by Lucas that have become essential references in the economic literature. The first paper explores the size distributions of firms, while the other two investigate the relationship between firms? investments, their valuations, and their rates of growth. These seminal papers have inspired numerous subsequent studies, significantly advancing our understanding of firm dynamics and investment behavior.