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American Economic Review Vol. 90 No. 5 2000

Aggregate Employment Fluctuations with Microeconomic Asymmetries

Jeffrey R. Campbell1; Jonas D. M. Fisher2

1 Department of Economics, University of Chicago, 1126 East 59th Street, Chicago, Illinois 60637, and National Bureau of Economic Research. · 2 Economic Research Department, Federal Reserve Bank of Chicago, 230 South La Salle Street, Chicago, Illinois 60604.

Abstract

We provide a simple explanation for the observation from the U.S. manufacturing sector that the job destruction rate fluctuates more than the job creation rate. In our model, proportional plant-level costs of creating and destroying jobs cause shrinking plants to be more sensitive to aggregate shocks than growing plants. We describe circumstances in which this microeconomic asymmetry is preserved in the aggregate and show that it can account for much of the observed asymmetries in gross job flows. This is so even though we abstract from job matching frictions, incomplete contracts, and aggregate congestion effects.

DOI
10.1257/aer.90.5.1323
Volume
90
Issue
5
Pages
1323-1345
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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