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American Economic Review: Vol. 89 No. 5 (December 1999)

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On the Driving Forces behind Cyclical Movements in Employment and Job Reallocation

Article Citation

Davis, Steven J., and John Haltiwanger. 1999. "On the Driving Forces behind Cyclical Movements in Employment and Job Reallocation." American Economic Review, 89(5): 1234-1258.

DOI: 10.1257/aer.89.5.1234

Abstract

Theory restricts short-run job creation and destruction responses and cumulative employment and job reallocation responses to allocative and aggregate shocks. We formulate these restrictions and implement them for postwar data on U.S. manufacturing. Allocative shocks are the main driving force behind cyclical movements in job reallocation, but their contribution to employment fluctuations varies greatly across alternative identification assumptions. Also, the data compel one or both of the following inferences: aggregate shocks greatly alter the shape and not just the mean of the cross-sectional density of employment growth rates; allocative shocks cause short-run reductions in aggregate employment.

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Authors

Davis, Steven J. (U Chicago and NBER)
Haltiwanger, John (U MD and NBER)

JEL Classifications

E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
E32: Business Fluctuations; Cycles
J63: Labor Turnover; Vacancies; Layoffs


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