Job Flows and Establishment Characteristics: Variations Across U.S. Metropolitan Areas

This paper addresses the role played within metropolitan areas by heterogeneous agent models of constant churning. The evidence shows positive relationships between job turnover, young establishments, and metropolitan employment growth. Most areas, however, differ in their levels of job creation rather than job destruction. Results persist after controlling for regional differences in industry, but less so when controlling for differences in the establishment age distribution, and are consistent overall with standard models of creative destruction. Evidence from several entering cohorts, however, contradicts the vintage replacement process of creative destruction models. Namely, job destruction decreases as establishments age and there is no clear inverse relation between establishment entry rates and exit ages. These patterns are instead consistent with a turnover process seen in standard models of firm learning. Further evidence suggests that these patterns vary systematically with the overall employment growth of a region. Together, the results suggest that (i) processes of both creative destruction and firm learning may matter for local labor dynamics, but future models will have to reconcile with this new evidence, and (ii) intrinsic local factors, such as the “business climate”, may affect the dynamics of both processes.http://deepblue.lib.umich.edu/bitstream/2027.42/39995/3/wp609.pd

What’s In a City?: Understanding the Micro-Level Employer Dynamics Underlying Urban Growth

This paper synthesizes the literatures on labor dynamics and urban growth and agglomeration by presenting new evidence on the micro-level establishment dynamics of metropolitan areas. I explore how the patterns of job reallocation and entry and exit affect the growth and composition of these areas. I find that high-growth metropolitan areas have high rates of job and establishment turnover, primarily though higher rates of gross job creation and establishment entry, and have a relatively young distribution of establishments. Variations in the age distribution and differences in the entry and exit patterns of young establishments account for a sizeable portion of regional differences in labor dynamics and growth, even after controlling for regional differences in industry composition. These results suggest that variations in the age distribution and the dynamics that lead to such variations are important factors in understanding urban growth and agglomeration.Job Reallocation; Urban Growth and Agglomeration; Firm Dynamics

Job Flows and Establishment Characteristics: Variations Across U.S. Metropolitan Areas

This paper addresses the role played within metropolitan areas by heterogeneous agent models of constant churning. The evidence shows positive relationships between job turnover, young establishments, and metropolitan employment growth. Most areas, however, differ in their levels of job creation rather than job destruction. Results persist after controlling for regional differences in industry, but less so when controlling for differences in the establishment age distribution, and are consistent overall with standard models of creative destruction. Evidence from several entering cohorts, however, contradicts the vintage replacement process of creative destruction models. Namely, job destruction decreases as establishments age and there is no clear inverse relation between establishment entry rates and exit ages. These patterns are instead consistent with a turnover process seen in standard models of firm learning. Further evidence suggests that these patterns vary systematically with the overall employment growth of a region. Together, the results suggest that (i) processes of both creative destruction and firm learning may matter for local labor dynamics, but future models will have to reconcile with this new evidence, and (ii) intrinsic local factors, such as the “business climate”, may affect the dynamics of both processes.job turnover, regional and urban growth, creative destruction, firm learning

Job flows, jobless recoveries, and the Great Moderation

This paper uses new data on job creation and job destruction to find evidence of a link between the jobless recoveries of the last two recessions and the recent decline in aggregate volatility known as the Great Moderation. The author finds that the last two recessions are characterized by jobless recoveries that came about through contrasting margins of employment adjustment—a relatively slow decline in job destruction in 1991-92 and persistently low job creation in 2002-03. In manufacturing, he finds that these patterns followed a secular decline in the magnitude of job flows and an abrupt decline in their volatility. A structural VAR analysis suggests that these patterns are driven by a decline in the volatilities of the underlying structural shocks in addition to a shift in the response of job flows to these shocks. The shift in structural responses is broadly consistent with the change in job flow patterns observed during the jobless recoveries.Job analysis ; Employment ; Unemployment

Revisiting the role of home production in life-cycle labor supply

This paper revisits the argument, posed by Rupert, Rogerson, and Wright (2000), that estimates of the intertemporal elasticity of labor supply that do not account for home production are biased downward. The author uses the American Time Use Survey, a richer and more comprehensive data source than those used previously, to replicate their analysis, but he also explores how other factors interact with household and market work hours to affect the elasticity of labor supply. An exact replication of their analysis yields an elasticity of about 0.4, somewhat larger than previously estimated. Once the author accounts for demographics and household characteristics, particularly the number of children in the household, the estimate is essentially zero. This is true even when accommodating extensive-margin labor adjustments. Households' biological inability to smooth childbearing over the life cycle and the resulting income effect on market work hours drive this result.Labor supply ; Hours of labor ; Labor productivity

Studying the Labor Market with the Job Openings and Labor Turnover Survey

The Job Openings and Labor Turnover Survey (JOLTS) is a new data source of the Bureau of Labor Statistics that estimates monthly vacancies, hires, and separations. It has quickly become a useful tool for studying the labor market. This chapter summarizes its aggregate and micro-level evidence, including the relations of vacancies and worker flows to unemployment and other measures of labor market conditions. The chapter also discusses the implications of this evidence and the potential of the data for future research.Vacancies; Beveridge Curve; Labor Turnover; Labor Market Search;

Job Flows and the Recent Business Cycle: Not All "Recoveries" Are Created Equal

The last two economic downturns are notable for their slow labor market recoveries. Yet, the behavior of their underlying gross job flows is quite different. The 1990-92 period had a relatively slow decline in job destruction, while the 2001-03 period had a large, persistent decline in job creation that occurs across most industries. The dynamics of the latter period run counter to the conventional wisdom that large movements in job destruction drive business cycles. Evidence spanning the entire postwar period suggests that job creation is at a historic low, and that its recent patterns are part of decades-long decline in the magnitude and volatility of job reallocation.Job Reallocation; Business Cycles; Employment Fluctuations

Gross Job Flows over the Past Two Business Cycles: Not all 'Recoveries' are Created Equal

I compare the behavior of job creation and job destruction over the past two economic downturns. Both periods have brief but sharp rises in job destruction followed by flat net job growth. The dynamics underlying these slow recoveries differ drastically. In 1991-92, job destruction is slow to decline. In 2001, job creation falls dramatically and remains persistently low through 2003. I find this trend qualitatively similar in both manufacturing and service industries. I also find that neither a structural shift of jobs across industries nor increased trade liberalization is a consistent explanation for the recent lack of growth. Instead, the evidence suggests that a large drop in business investment may explain the decline in job creation.job reallocation, business cycles, employment fluctuations

The relationship between the establishment age distribution and urban growth

This paper presents new evidence on the relationship between a metropolitan area’s employment growth and its establishment age distribution. The author finds that cities with a relatively younger distribution of establishments tend to have higher growth, as well as higher job and establishment turnover. Geographic variations in the age distribution account for 38 percent of the geographic differences in growth, compared to the 32 percent accounted for by variations in industry composition. Differences are disproportionately accounted for by entrants and young (5 years or younger) establishments. Furthermore, the relationship between age and growth is robust to controls for urban diversity and education. Overall, the results support a microfoundations view of urban growth, where the benefits of agglomeration affect firms not through some production externality but through a process that determines which firms enter, exit, and thrive at a given location.