Organizational Flexibility and Employment Dynamics at Young and Old Plants

44 Pages Posted: 22 Apr 1999 Last revised: 11 Aug 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: November 1998

Abstract

There are significant differences in the dynamics of employment over the business cycle between young and old manufacturing plants. Young plants are more sensitive to aggregate disturbances, and they respond to them along different margins. We interpret these differences as reflecting greater organizational flexibility at young plants due to the changing nature of a plant's environment as it ages. In the presence of aggregate uncertainty, differences between young and old plants' organizational flexibility allows the model to reproduce their distinct cyclical characteristics. Previous empirical studies show that small firms generally respond by more to aggregate shocks than do large firms. To the extent that small firms tend to operate young plants, our analysis suggests an alternative to conventional explanations of this evidence which appeal to imperfections in credit markets.

Suggested Citation

Campbell, Jeffrey R. and Fisher, Jonas D. M., Organizational Flexibility and Employment Dynamics at Young and Old Plants (November 1998). NBER Working Paper No. w6809, Available at SSRN: https://ssrn.com/abstract=141273

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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