Job Destruction and Propagation of Shocks
- (pp. 482-498)
AbstractThis paper considers propagation of aggregate shocks in a dynamic general-equilibrium model with labor-market matching and endogenous job destruction. Cyclical fluctuations in the job-destruction rate magnify the output effects of shocks, as well as making them much more persistent. Interactions between capital adjustment and the job-destruction rate play an important role in generating persistence. Propagation effects are shown to be quantitatively substantial when the model is calibrated using job-flow data. incorporating costly capital adjustment leads to significantly greater propagation.
Citationden Haan, Wouter, J., Garey Ramey, and Joel Watson. 2000. "Job Destruction and Propagation of Shocks." American Economic Review, 90 (3): 482-498. DOI: 10.1257/aer.90.3.482
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
- E32 Business Fluctuations; Cycles