David Berger - Jobless Growth in a Way That Makes Sense

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Countercyclical Restructuring and Jobless Recoveries
David Berger
Northwestern
David Berger (Northwestern) Countercyclical...

Motivation: understanding jobless recoveries
The Great Recession
1 Hours and employment still 7% below pre-recession high
...

Stylized facts
Until mid-1980s
1 Employment rebounded quickly during recovery
2 Average labor productivity (ALP) was stron...

New stylized facts
1 Jobless recoveries
2 Less cyclical ALP
-20246
%chg
0 2 4 6 8
Quarters since NBER trough
Avg pre-91
19...

Results
Model can match new business cycle facts
Restructuring e¤ect on the intensive margin
Basic mechanism
Firms get "fa...

Intuition
Acyclical ALP
Selective …ring ) match quality is countercyclical
Jobless recoveries
Fire low quality workers and...

Results
Provide evidence on what changed in the 1980s
Large decline in union power ) more scope for selective …ring
Firms ...

Fact 1: Jobless recoveries
-20246
%chg
0 2 4 6 8
Quarters since NBER trough
Avg pre-91
1990-91
2001
2007-09
Total Hours
-2...

Fact 2: Correlation of output and ALP
-.50.51
1947q3 1960q1 1972q3 1985q1 1997q3 2010q1
Rolling correlation: output and AL...

Two period model
Goal:
1 Illustrate how heterogeneity, learning and selective …ring interact to
generate restructuring mar...

Setup
Production
One homogeneous good is produced and sold in competitive markets
2 types of matches:
E¢ ciency units θH a...

Timing
First period
Firms endowed with (z1, L1, α1)
Second period
Learn quality of all employees
Firms hire or …re and pro...

Firms Problem
Given α1, L1 and z2, the …rm’s optimal employment in the second period, L2,
solves:
max
L2
z2 θ(α2)L2
γ
L2
w...

Implication 1: ALP
Consider what happens after a fall in TFP: z2 = (1 τ)z1
Aggregate output and labor: Y =
R
yi and L =
R
...

Implication 2: Jobless recoveries
Consider what happens after an increase in TFP: z2 = (1 + τ)z1
Employment growth rate if...

Implication 2: Jobless recoveries
We learn two things from : τ = θ(α1)
θ(p)
1
1 τ > 0
Firms need larger TFP draws to begin...

What changed in the 1980s
Large decline in union power in the U.S. during the 1980s
David Berger (Northwestern) Countercyc...

What changed in the 1980s
Large decline in union power in the U.S. during the 1980s
Unions: layo¤s done by seniority rathe...

What changed in the 1980s
Large decline in union power in the U.S. during the 1980s
Unions: layo¤s done by seniority rathe...

What changed in the 1980s
Large decline in union power in the U.S. during the 1980s
Unions: layo¤s done by seniority rathe...

Testing the union power hypothesis
1 Idea: states with larger declines in union coverage rates should have large
declines ...

State level results
Change in corr(Y,Y/E) % change in corr(Y,Y/E)
bα 0.082 0.182
(0.183) (0.291)
bβ 0.565* 0.878**
(0.292)...

State level results: right-to-work states
Idea: If union power hypothesis is correct, results should be stronger in non
ri...

Conclusion
Since mid-1980s:
Employment recoveries have been jobless
ALP has been acyclical
Standard models cannot match th...

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