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.
Citation2000. "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