Self-Stabilizing Firms and Unemployment Persistence
نویسندگان
چکیده
The question of why the unemployment rate takes a long time before it reverts back to its natural-rate following a negative exogenous shock has been the subject of unremitting interest in macroeconomics. This paper shows that the speed of adjustment to the steady-state unemployment and the degree of risk-aversion in firms are positively related. The reason is that risk-aversion in firms creates a self-adjusting mechanism whereby cautious firms try to vigorously regain the pre-shock employment levels in an attempt to minimize fluctuations in profits. JEL Classification: E24, E27
منابع مشابه
Sunspot equilibria with persistent unemployment fluctuations∗
We provide a business cycle model able to replicate the large amount of persistence in output and unemployment fluctuations found in the data. These variations in the unemployment rate are the result of self-fulfilling changes in expectations about future inflation in the wage bargaining process between workers of firms. ∗Financial support from the Agence Nationale de la Recherche (ANR) is grat...
متن کاملWages and Employment Persistence with Multi-worker Firms
We present a generalization of the standard random-search model of unemployment in which firms hire multiple workers and in which the hiring process is time-consuming as well as costly. We follow Stole and Zwiebel (1996a,b) and assume that wages are determined by continuous bargaining between the firm and its employees. This generates a non-trivial dispersion of firm sizes; when firms’ producti...
متن کاملEvaluating Tax Persistence and Future Tax Risk of Firms by Emphasizing on Ownership Type
According to Agency Theory, one of the objectives of earning management is, to reduce liabilities and tax payments through minimizing the effective tax rate. Either, by short-term and opportunistic goals or by reducing long-term taxes and creating firm value, tax strategies reduce the effective tax rate. The purpose of this paper is to determine the effect of effective tax rates on tax persiste...
متن کاملStart-ups, House Prices, and the Jobless Recovery
Start-ups and young firms play a crucial role for US job creation: they grow faster and create more net jobs than older, incumbent firms. Yet since 2007 the number of start-ups in the US has declined by over 20%. Young firm’s below-trend job creation can account for almost all of the persistently high unemployment rate. In this paper I claim that this fact is related to the unprecedented fall i...
متن کاملUncertainty, Productivity and Unemployment in the Great Recession∗
The 2007-2009 recession has witnessed two phenomena that standard search models of the labor market have difficulty reconciling: a large and persistent increase in unemployment and a sharp rise, above pre-recession levels, in labor productivity following a small initial drop. In addition, these observations were accompanied by a significant increase in the dispersion of firm growth rates. In th...
متن کامل