This paper develops a theory of layoffs in an intertemporal setting in which job separations may occur in each of several successive periods. Theoretical analysis of temporary layoffs in previous studies has been limited to models in which the layoffs occur only in the final period of the model. This multiperiod implicit contract framework enables us to identify distinguishing characteristics of temporary and permanent layoffs that were heretofore blurred or distorted in previous contract analyses.

We study an economy in which producers incur resource costs to replace depreciated machines. The process of costly replacement and depreciation creates endogenous fluctuations in productivity, employment, and output of a single producer. We explore the spillover effects of machine replacement on other sectors of the economy and provide conditions for synchronized machine replacement by multiple independent producers. The implications of our model are generally consistent with observed monthly output, employment, and productivity fluctuations in automobile plants. Synchronization of retooling across plants within the auto industry is widespread, so that the fluctuations observed at the plant level have aggregate implications.

This paper contrasts the dynamic properties of an imperfectly competitive economy with a representative agent, real business cycle model. For both economies, inventories are the important dynamic linkage. The predictions of these models with regards to the comovement of employment across sectors may differ. Empirical evidence on the comovement of employment over the business cycle is consistent with the model of imperfect competition with inventory holdings.

In this paper, we use linked employer-employee data to study the reallocation of heterogeneous workers between heterogeneous firms. We build on recent evidence of a cyclical job ladder that reallocates workers from low-productivity to high-productivity firms through job-to-job moves. In this paper, we turn to the question of who moves up this job ladder and the implications for worker sorting across firms. Not surprisingly, we find that job-to-job moves reallocate younger workers disproportionately from less productive to more productive firms. More surprisingly, especially in the context of the recent literature on assortative matching with on-the-job search, we find that job-to-job moves disproportionately reallocate less educated workers up the job ladder. This finding holds even though we find that more educated workers are more likely to work with more productive firms. We find that while highly educated workers are less likely to match to low-productivity firms, they are also less likely to separate from them, with less educated workers more likely to separate to a better employer in expansions and to be shaken off the ladder (separate to nonemployment) in contractions. Our findings underscore the cyclical role job-to-job moves play in matching workers to better-paying employers.

This paper provides empirical evidence on macroeconomic complementarities, a restriction on the nature of interaction between individuals in a multi-agent setting. These models imply that activities across agents will be positively correlated, that discrete decisions will be synchronized and that disturbances will be magnified and propagated. The paper shows that these implications are consistent with aggregate observations as well as some microeconomic evidence. Further, looking at certain historical episodes, such as the NIRA, as well as seasonal fluctuations provides additional support for models with macroeconomic complementarities.

This paper studies the nature of capital adjustment at the plant-level. We use an indirect inference procedure to estimate the structural parameters of a rich specification of capital adjustment costs. In effect, the parameters are optimally chosen to reproduce

Analyses of survey data highlight observable person characteristics, such as education and occupation, as critical factors for rising earnings inequality, while industry has an offsetting effect. In contrast, analysis of administrative data highlights that rising between-firm earnings dispersion and, in turn, between-industry earnings dispersion dominates the rise in earnings inequality. We construct a novel integrated dataset based on CPS micro data linked with LEHD administrative records. We find that most of the rise in earnings inequality is accounted for by rising between-industry inequality. This finding reflects a substantial contribution of increased sorting and segregation of observable person characteristics between industries.

In recent years a large literature has developed that investigates the role of insurance in labor market contracting. Papers in this literature typically assume that workers are completely restricted from borrowing. We argue, and to some extent demonstrate, that in many environments capital market imperfections do not lead to a noborrowing result but rather to a capital market assumption that is intermediate between the no-borrowing assumption and the perfect capital market assumption. We then consider some of the ramifications that this intermediate capital market assumption has on the type of insurance the firms provide through the labor market contract.