What forces determine national differences in the size and industry distribution of employment? W... more What forces determine national differences in the size and industry distribution of employment? We stress the role of the economic policy environment as determined by business taxes, employment security laws, credit market regulations, the national pension system, wage-setting institutions and the size of the public sector. We characterize these aspects of the economic environment in Sweden prior to 1990–91 and compare them to the situation in other European countries and the United States. Our characterization and international comparisons show that Swedish policies and institutions strongly disfavored less capital-intensive firms, smaller firms, entry by new firms, and individual and family ownership of business. We also compile evidence that these forces affect outcomes. Taking the U.S. industry distribution as a benchmark that reflects a comparatively neutral set of policies and institutions, Sweden's employment distribution in the mid-1980s is sharply tilted away from low-wage industries and industries with greater employment shares for smaller firms and establishments. Compared to other European countries, Sweden has an unusually high share of employment in large firms. Furthermore, the Swedish rate of self- employment in the 1970s and 1980s is the lowest among all OECD countries. The institutional and policy factors emphasized by our study differ greatly across countries. This fact suggests that our approach can be fruitfully applied to other studies of national differences in industry and size structures and their evolution over time. As an example, the tax reform wave of the 1980s – which largely evened out cross-country differences in corporate taxation among OECD countries – offers some basis for projecting a movement towards greater similarity among wealthy countries in the size and industry distribution of employment.
Centralized wage setting arrangements compress wage differentials along many dimensions, but how ... more Centralized wage setting arrangements compress wage differentials along many dimensions, but how do they affect employment structure? To address this issue, we relate the evolution of U.S.-Swedish differences in the industry distribution of employment to relative wages between and within industries. We find that centralized wage setting shifted Swedish employment away from industries with high wage dispersion among workers, a high mean wage and, especially, a low mean wage. The dissolution of Sweden's centralized wage-setting beginning in 1983 led to widening wage differentials and a reversal in the evolution of U.S.-Swedish differences in industry structure.
We analyze consumption and portfolio behavior in a life-cycle model with realistic borrowing cost... more We analyze consumption and portfolio behavior in a life-cycle model with realistic borrowing costs and income processes. We show that even a small wedge between borrowing costs and the risk-free return dramatically shrinks the demand for equity. When the cost of borrowing equals or exceeds the expected return on equity -the relevant case according to the data -households hold little or no equity during much of the life cycle. The model also implies that the correlation between consumption growth and equity returns is low at all ages, and that risk aversion estimates based on the standard excess return formulation of the consumption Euler Equation are greatly upward biased. The demand for equity in the model is non-monotonic in borrowing costs and risk aversion, and the standard deviation of marginal utility growth is an order of magnitude smaller than the Sharpe ratio.
This paper develops and applies a simple graphical approach to portfolio selection that accounts ... more This paper develops and applies a simple graphical approach to portfolio selection that accounts for covariance between asset returns and an investor's labor income. Our graphical approach easily handles income shocks that are partly hedgable, multiple risky assets, many periods and life cycle considerations.
We study the effects of oil price shocks on the creation and destruction of U.S. manufacturing jo... more We study the effects of oil price shocks on the creation and destruction of U.S. manufacturing jobs from 1972 to 1988. Oil shocks account for 20-25 percent of the variability in employment growth, twice as much as monetary shocks. The two-year employment response to an oil price increase rises (in magnitude) with capital intensity, energy intensity and product durability. Job destruction shows much greater short-run sensitivity to oil and monetary shocks than job creation except at young, small plants. Employment growth responds asymmetrically to oil price $ (S.J. Davis). 0304-3932/01/$ -see front matter r 2001 Elsevier Science B.V. All rights reserved. PII: S 0 3 0 4 -3 9 3 2 ( 0 1 ) 0 0 0 8 6 -1 ups and downs, and oil shocks trigger considerable job reallocation activity. r 2001 Elsevier Science B.V. All rights reserved. JEL classificaion: E32; J63; Q43; L60
The impact of private equity on employment outcomes arouses considerable controversy. Critics cla... more The impact of private equity on employment outcomes arouses considerable controversy. Critics claim that private equity buyouts bring huge job losses, while private equity groups claim large employment gains. To address the issue, we construct and analyze a new dataset that overcomes many of the limitations in previous research. We examine U.S. private equity transactions from 1980 to 2005, following 4,500 target firms and more than 200,000 establishments before and after acquisition by private equity groups. We compare employment outcomes at target firms and their establishments to controls that have no private equity ties and that are similar in terms of industry, size and age.
data. This measurement-intensive effort exploits a tremendously rich data set with approximately ... more data. This measurement-intensive effort exploits a tremendously rich data set with approximately 860,000 annual observations and 3.4 million quarterly observations on 160,000 different manufacturing establishments. The data are longitudinal and include observations on all manufacturing establishments sampled in the Annual Survey of Manufactures between 1972 and 1986. The combination of establishment-level longitudinal data, high-frequency observations, a 15-year sample, and comprehensive coverage of the manufacturing sector provides an excellent basis for exploring the connection between the heterogeneity of establishmentlevel employment changes and aggregate fluctuations.
Page 1. On the Driving Forces Behind Cyclical Movements in Employment and Job Reallocation By STE... more Page 1. On the Driving Forces Behind Cyclical Movements in Employment and Job Reallocation By STEVEN J. DAVIS AND JOHN HALTIWANGER* Theory restricts short-run job creation and destruction responses and cumulative ...
This paper investigates how job creation and destruction behavior varies by employer size in the ... more This paper investigates how job creation and destruction behavior varies by employer size in the U.S. manufacturing sector during the period 1972 to 1988. The paper also evaluates the empirical basis for conventional claims about the job-creating prowess of small businesses. The chief findings and conclusions fall into five categories: Conventional wisdom about the job-creating prowess of small businesses rests on misleading interpretations of the data. Many previous studies of the job creation process rely upon data that are not suitable for drawing inferences about the relationship between employer size and job creation. Large plants and firms account for most newly-created and newly-destroyed manufacturing jobs. Survival rates for new and existing manufacturing jobs increase sharply with employer size. Smaller manufacturing firms and plants exhibit sharply higher gross rates of job creation but not higher net rates.
We study the effects of oil price shocks on the creation and destruction of U.S. manufacturing jo... more We study the effects of oil price shocks on the creation and destruction of U.S. manufacturing jobs from 1972 to 1988. Oil shocks account for 20-25 percent of the variability in employment growth, twice as much as monetary shocks. The two-year employment response to an oil price increase rises (in magnitude) with capital intensity, energy intensity and product durability. Job destruction shows much greater short-run sensitivity to oil and monetary shocks than job creation except at young, small plants. Employment growth responds asymmetrically to oil price $ (S.J. Davis). 0304-3932/01/$ -see front matter r 2001 Elsevier Science B.V. All rights reserved. PII: S 0 3 0 4 -3 9 3 2 ( 0 1 ) 0 0 0 8 6 -1 ups and downs, and oil shocks trigger considerable job reallocation activity. r 2001 Elsevier Science B.V. All rights reserved. JEL classificaion: E32; J63; Q43; L60
This study measures the heterogeneity of establishment-level employment changes in the U.S. manuf... more This study measures the heterogeneity of establishment-level employment changes in the U.S. manufacturing sector over the 1972 to 1986 period. We measure this heterogeneity in terms of the gross creation and destruction of jobs and the rate at which jobs are reallocated across plants. Our measurement efforts enable us to quantify the connection between job reallocation and worker reallocation, to evaluate theories of heterogeneity in plant-level employment dynamics, and to establish new results related to the cyclical behavior of the labor market.
What forces determine national differences in the size and industry distribution of employment? W... more What forces determine national differences in the size and industry distribution of employment? We stress the role of the economic policy environment as determined by business taxes, employment security laws, credit market regulations, the national pension system, wage-setting institutions and the size of the public sector. We characterize these aspects of the economic environment in Sweden prior to 1990–91 and compare them to the situation in other European countries and the United States. Our characterization and international comparisons show that Swedish policies and institutions strongly disfavored less capital-intensive firms, smaller firms, entry by new firms, and individual and family ownership of business. We also compile evidence that these forces affect outcomes. Taking the U.S. industry distribution as a benchmark that reflects a comparatively neutral set of policies and institutions, Sweden's employment distribution in the mid-1980s is sharply tilted away from low-wage industries and industries with greater employment shares for smaller firms and establishments. Compared to other European countries, Sweden has an unusually high share of employment in large firms. Furthermore, the Swedish rate of self- employment in the 1970s and 1980s is the lowest among all OECD countries. The institutional and policy factors emphasized by our study differ greatly across countries. This fact suggests that our approach can be fruitfully applied to other studies of national differences in industry and size structures and their evolution over time. As an example, the tax reform wave of the 1980s – which largely evened out cross-country differences in corporate taxation among OECD countries – offers some basis for projecting a movement towards greater similarity among wealthy countries in the size and industry distribution of employment.
Centralized wage setting arrangements compress wage differentials along many dimensions, but how ... more Centralized wage setting arrangements compress wage differentials along many dimensions, but how do they affect employment structure? To address this issue, we relate the evolution of U.S.-Swedish differences in the industry distribution of employment to relative wages between and within industries. We find that centralized wage setting shifted Swedish employment away from industries with high wage dispersion among workers, a high mean wage and, especially, a low mean wage. The dissolution of Sweden's centralized wage-setting beginning in 1983 led to widening wage differentials and a reversal in the evolution of U.S.-Swedish differences in industry structure.
We analyze consumption and portfolio behavior in a life-cycle model with realistic borrowing cost... more We analyze consumption and portfolio behavior in a life-cycle model with realistic borrowing costs and income processes. We show that even a small wedge between borrowing costs and the risk-free return dramatically shrinks the demand for equity. When the cost of borrowing equals or exceeds the expected return on equity -the relevant case according to the data -households hold little or no equity during much of the life cycle. The model also implies that the correlation between consumption growth and equity returns is low at all ages, and that risk aversion estimates based on the standard excess return formulation of the consumption Euler Equation are greatly upward biased. The demand for equity in the model is non-monotonic in borrowing costs and risk aversion, and the standard deviation of marginal utility growth is an order of magnitude smaller than the Sharpe ratio.
This paper develops and applies a simple graphical approach to portfolio selection that accounts ... more This paper develops and applies a simple graphical approach to portfolio selection that accounts for covariance between asset returns and an investor's labor income. Our graphical approach easily handles income shocks that are partly hedgable, multiple risky assets, many periods and life cycle considerations.
We study the effects of oil price shocks on the creation and destruction of U.S. manufacturing jo... more We study the effects of oil price shocks on the creation and destruction of U.S. manufacturing jobs from 1972 to 1988. Oil shocks account for 20-25 percent of the variability in employment growth, twice as much as monetary shocks. The two-year employment response to an oil price increase rises (in magnitude) with capital intensity, energy intensity and product durability. Job destruction shows much greater short-run sensitivity to oil and monetary shocks than job creation except at young, small plants. Employment growth responds asymmetrically to oil price $ (S.J. Davis). 0304-3932/01/$ -see front matter r 2001 Elsevier Science B.V. All rights reserved. PII: S 0 3 0 4 -3 9 3 2 ( 0 1 ) 0 0 0 8 6 -1 ups and downs, and oil shocks trigger considerable job reallocation activity. r 2001 Elsevier Science B.V. All rights reserved. JEL classificaion: E32; J63; Q43; L60
The impact of private equity on employment outcomes arouses considerable controversy. Critics cla... more The impact of private equity on employment outcomes arouses considerable controversy. Critics claim that private equity buyouts bring huge job losses, while private equity groups claim large employment gains. To address the issue, we construct and analyze a new dataset that overcomes many of the limitations in previous research. We examine U.S. private equity transactions from 1980 to 2005, following 4,500 target firms and more than 200,000 establishments before and after acquisition by private equity groups. We compare employment outcomes at target firms and their establishments to controls that have no private equity ties and that are similar in terms of industry, size and age.
data. This measurement-intensive effort exploits a tremendously rich data set with approximately ... more data. This measurement-intensive effort exploits a tremendously rich data set with approximately 860,000 annual observations and 3.4 million quarterly observations on 160,000 different manufacturing establishments. The data are longitudinal and include observations on all manufacturing establishments sampled in the Annual Survey of Manufactures between 1972 and 1986. The combination of establishment-level longitudinal data, high-frequency observations, a 15-year sample, and comprehensive coverage of the manufacturing sector provides an excellent basis for exploring the connection between the heterogeneity of establishmentlevel employment changes and aggregate fluctuations.
Page 1. On the Driving Forces Behind Cyclical Movements in Employment and Job Reallocation By STE... more Page 1. On the Driving Forces Behind Cyclical Movements in Employment and Job Reallocation By STEVEN J. DAVIS AND JOHN HALTIWANGER* Theory restricts short-run job creation and destruction responses and cumulative ...
This paper investigates how job creation and destruction behavior varies by employer size in the ... more This paper investigates how job creation and destruction behavior varies by employer size in the U.S. manufacturing sector during the period 1972 to 1988. The paper also evaluates the empirical basis for conventional claims about the job-creating prowess of small businesses. The chief findings and conclusions fall into five categories: Conventional wisdom about the job-creating prowess of small businesses rests on misleading interpretations of the data. Many previous studies of the job creation process rely upon data that are not suitable for drawing inferences about the relationship between employer size and job creation. Large plants and firms account for most newly-created and newly-destroyed manufacturing jobs. Survival rates for new and existing manufacturing jobs increase sharply with employer size. Smaller manufacturing firms and plants exhibit sharply higher gross rates of job creation but not higher net rates.
We study the effects of oil price shocks on the creation and destruction of U.S. manufacturing jo... more We study the effects of oil price shocks on the creation and destruction of U.S. manufacturing jobs from 1972 to 1988. Oil shocks account for 20-25 percent of the variability in employment growth, twice as much as monetary shocks. The two-year employment response to an oil price increase rises (in magnitude) with capital intensity, energy intensity and product durability. Job destruction shows much greater short-run sensitivity to oil and monetary shocks than job creation except at young, small plants. Employment growth responds asymmetrically to oil price $ (S.J. Davis). 0304-3932/01/$ -see front matter r 2001 Elsevier Science B.V. All rights reserved. PII: S 0 3 0 4 -3 9 3 2 ( 0 1 ) 0 0 0 8 6 -1 ups and downs, and oil shocks trigger considerable job reallocation activity. r 2001 Elsevier Science B.V. All rights reserved. JEL classificaion: E32; J63; Q43; L60
This study measures the heterogeneity of establishment-level employment changes in the U.S. manuf... more This study measures the heterogeneity of establishment-level employment changes in the U.S. manufacturing sector over the 1972 to 1986 period. We measure this heterogeneity in terms of the gross creation and destruction of jobs and the rate at which jobs are reallocated across plants. Our measurement efforts enable us to quantify the connection between job reallocation and worker reallocation, to evaluate theories of heterogeneity in plant-level employment dynamics, and to establish new results related to the cyclical behavior of the labor market.
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