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PLANT LIFE CYCLE AND AGGREGATE EMPLOYMENT DYNAMICS

Published online by Cambridge University Press:  30 July 2013

Min Ouyang
Min Ouyang*
Affiliation:
School of Economics and Management, Tsinghua University
*
Address correspondence to: Min Ouyang, Department of Economics, School of Economics and Management, Tsinghua University, Beijing 100084, PR China; email: ouyangm@sem.tsinghua.edu.cn.
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Abstract

Past empirical studies have repeatedly found that plant age matters for aggregate employment dynamics. This paper develops a model of plant life cycle to capture this empirical regularity. In the model, plants differ by vintage and by idiosyncratic productivity. The idiosyncratic productivity is not directly observable, but can be learned over time. This setup gives rise to a learning effect and a creative-destruction effect, under which labor flows from plants with low idiosyncratic productivity to those with high idiosyncratic productivity and from old vintages to new vintages. When calibrated to the U.S. manufacturing job flow series, our model of plant life cycle delivers the observed link between plant age and aggregate employment dynamics.

Keywords

Plant Life CycleAggregate Employment DynamicsHeterogeneous Businesses
Type
Articles
Information
Macroeconomic Dynamics , Volume 18 , Issue 2 , March 2014 , pp. 255 - 281
Copyright
Copyright © Cambridge University Press 2013 

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