Aggregate Employment Fluctuations with Microeconomic Asymmetries

29 Pages Posted: 10 Mar 1997 Last revised: 5 Apr 2021

See all articles by Jeffrey R. Campbell

Jeffrey R. Campbell

University of Notre Dame; Tilburg University

Jonas D. M. Fisher

Federal Reserve Bank of Chicago - Economic Research Department

Date Written: September 1996

Abstract

We provide a simple explanation for the observation that the variance of job destruction is greater than the variance of job creation: job creation is costlier at the margin than job destruction. As Caballero [2] has argued, asymmetric employment adjustment costs at the establishment level need not imply asymmetric volatility of aggregate job flows. We construct an equilibrium model in which (S,s)-type employment policies respond endogenously to aggregate shocks. The microeconomic asymmetries in the model can dampen the response of total job creation to an aggregate shock and cause it to be less volatile than total job destruction. This is so even though aggregate shocks are symmetrically distributed.

Suggested Citation

Campbell, Jeffrey R. and Fisher, Jonas D. M., Aggregate Employment Fluctuations with Microeconomic Asymmetries (September 1996). NBER Working Paper No. w5767, Available at SSRN: https://ssrn.com/abstract=3786

Jeffrey R. Campbell (Contact Author)

University of Notre Dame ( email )

United States

Tilburg University ( email )

Tilburg, 5000 LE
Netherlands

Jonas D. M. Fisher

Federal Reserve Bank of Chicago - Economic Research Department ( email )

230 South LaSalle Street
Chicago, IL 60604-1413
United States

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