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1997•National Bureau of Economic ResearchOpen access

Job Destruction and Propagation of Shocks

Wouter J. Den Haan, Garey Ramey, Joel Watson

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Abstract

We develop and quantitatively implement a dynamic general equilibrium model with labor market matching and endogenous job destruction. The model produces a close match with data job creation and destruction. Cyclical fluctuations in job destruction rate serve to magnify the effects of productivity shock on output, as well as making effects much more persistent. Interactions between household savings decisions and separation decisions in employment relationships play a key role in propagating shocks.

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What this paper is about

We develop and quantitatively implement a dynamic general equilibrium model with labor market matching and endogenous job destruction. The model produces a close match with data job creation and destruction. Cyclical fluctuations in job destruction rate serve to magnify the effects of productivity shock on output, as well as making effects much more persistent. Interactions between household savings decisions and separation decisions in employment relationships play a key role in propagating shocks.

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Available abstract

We develop and quantitatively implement a dynamic general equilibrium model with labor market matching and endogenous job destruction. The model produces a close match with data job creation and destruction. Cyclical fluctuations in job destruction rate serve to magnify the effects of productivity shock on output, as well as making effects much more persistent. Interactions between household savings decisions and separation decisions in employment relationships play a key role in propagating shocks.

Key concepts: Computer science, Geology, Environmental science

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