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Organizational Capital and Employment Fluctuations

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  • Thijs van Rens

    (Dept of Economics Princeton University)

Abstract
In this paper I present a model in which production requires two types of labor inputs: regular productive tasks and organizational capital, which is accumulated by workers performing organizational tasks. By allocating more workers from organizational to productive tasks, firms can temporarily increase production without hiring. The availability of this intensive margin of labor adjustment, in combination with adjustment costs along the extensive margin (search frictions, firing costs, training costs), makes it optimal to delay employment adjustments. Simulations indicate that this mechanism is quantitatively important even if only a small fraction of workers perform organizational tasks, and explains why the hiring rate is persistent and why employment is slow to recover after the end of a recession.
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  • Thijs van Rens, 2005. "Organizational Capital and Employment Fluctuations," 2005 Meeting Papers 427, Society for Economic Dynamics.
    • Handle: RePEc:red:sed005:427
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    3. Michael W. L. Elsby & Bart Hobijn & Aysegul Sahin, 2010. "The Labor Market in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(1 (Spring), pages 1-69.
    4. Kopytov, Alexandr & Roussanov, Nikolai & Taschereau-Dumouchel, Mathieu, 2018. "Short-run pain, long-run gain? Recessions and technological transformation," Journal of Monetary Economics, Elsevier, vol. 97(C), pages 29-44.
    5. Otsu, Keisuke & Saito, Masashi, 2013. "Organizational dynamics and aggregate fluctuations: The role of financial relationships," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 3044-3058.
    6. Bauer, Anja & Lochner, Benjamin, 2020. "History dependence in wages and cyclical selection: Evidence from Germany," Labour Economics, Elsevier, vol. 67(C).
    7. Edward P. Lazear & Kathryn L. Shaw & Christopher Stanton, 2016. "Making Do with Less: Working Harder during Recessions," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 333-360.
    8. McKay, Alisdair & Reis, Ricardo, 2008. "The brevity and violence of contractions and expansions," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 738-751, May.
    9. David Berger, 2012. "Countercyclical Restructuring and Jobless Recoveries," 2012 Meeting Papers 1179, Society for Economic Dynamics.
    10. Mary Daly & Bart Hobijn & Aysegul Sahin & Robert Valletta, 2011. "A Rising Natural Rate of Unemployment: Transitory or Permanent?," Tinbergen Institute Discussion Papers 11-160/3, Tinbergen Institute.

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    More about this item

    Keywords

    employment fluctuations; business cycle; hiring rate; organizational capital;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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