American Economic Review Vol. 87 No. 1 1997
Aggregate Employment Dynamics: Building from Microeconomic Evidence
Abstract
This paper studies quarterly employment flows of approximately 10,000 U.S. manufacturing establishments. We use establishments' hours-week to construct measures of the deviation between desired and actual employment and use these as the establishments' main state variables. Our main findings are: (i) micro-economic adjustment functions are nonlinear, with plants adjusting disproportionately to large shortages; (ii) adjustments are often either large or nil, suggesting the presence of nonconvexities in the adjustment cost technologies; (iii) the bulk of average employment fluctuations is accounted for by aggregate, rather than reallocation, shocks; and (iv) microeconomic nonlinearities amplify the impact of large aggregate shocks.
- Volume
- 87
- Issue
- 1
- Pages
- 115-137
- Sources
- bibtex:phds-export.bib