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On the Driving Forces Behind Cyclical Movement, in Employment and Job Reallocation


Steven J. Davis


University of Chicago; National Bureau of Economic Research (NBER)

John Haltiwanger


University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

September 1996

NBER Working Paper No. w5775

Abstract:     
We rely on a decomposition of employment changes into job creation and job destruction components - and a novel set of identifying restrictions that this decomposition permits - to develop new evidence about the driving forces behind aggregate fluctuations and the channels through which they operate. We implement our approach to identification using quarterly postwar U.S. data on oil shocks, monetary shocks, and manufacturing rates of job creation and destruction. Our analysis delivers many inferences: 1) The data favor a many- shock characterization of fluctuations in employment and job reallocation, 2) Theories of employment fluctuations that attribute a predominant role to aggregate shocks must in order to fit the data involve contemporaneous effects of such shocks on job destruction that are at least as large as the effects on job creation, 3) Theories in which aggregate shocks primarily affect the first moment of the cross-sectional density of employment growth imply that allocative shocks have bigger contemporaneous effects on destruction than on creation and, hence, that allocative shocks reduce aggregate employment, 4) Allocative shocks drive most fluctuations in the intensity of job reallocation, 5) Oil shocks drive employment fluctuations through a mixture of allocative and aggregate channels, 6) Monetary shocks trigger job creation and destruction dynamics that fit the profile of an aggregate shock.

Number of Pages in PDF File: 61

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Date posted: March 17, 1997  

Suggested Citation

Davis, Steven J. and Haltiwanger, John, On the Driving Forces Behind Cyclical Movement, in Employment and Job Reallocation (September 1996). NBER Working Paper No. w5775. Available at SSRN: http://ssrn.com/abstract=3807

Contact Information

Steven J. Davis (Contact Author)
University of Chicago ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7312 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
John C. Haltiwanger
University of Maryland - Department of Economics ( email )
College Park, MD 20742
United States
301-405-3504 (Phone)
301-405-3542 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany
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