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American Economic Journal: Macroeconomics: Vol. 2 No. 2 (April 2010)

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Business Volatility, Job Destruction, and Unemployment

Article Citation

Davis, Steven J., R. Jason Faberman, John Haltiwanger, Ron Jarmin, and Javier Miranda. 2010. "Business Volatility, Job Destruction, and Unemployment." American Economic Journal: Macroeconomics, 2(2): 259-87.

DOI: 10.1257/mac.2.2.259

Abstract

Unemployment inflows fell from 4 percent of employment per month in the early 1980s to 2 percent by the mid 1990s. Using low frequency movements in industry-level data, we estimate that a 1 percentage point drop in the quarterly job destruction rate lowers the monthly unemployment inflow rate by 0.28 points. By our estimates, declines in job destruction intensity account for 28 (55) percent of the fall in unemployment inflows from 1982 (1990) to 2005. Slower job destruction accounts for similar fractions of long-term declines in the rate of unemployment. (JEL E24, E32, J64)

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Authors

Davis, Steven J. (U Chicago)
Faberman, R. Jason (Federal Reserve Bank of Philadelphia)
Haltiwanger, John (U MD)
Jarmin, Ron (Center for Economics Studies, US Bureau of the Census)
Miranda, Javier (Center for Economics Studies, US Bureau of the Census)

JEL Classifications

E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
E32: Business Fluctuations; Cycles
J64: Unemployment: Models, Duration, Incidence, and Job Search

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