The paper explores the interaction between sector-specific human capital accumulation and sector-specific productivity or demand shocks. Our objective is to better understand the determinants of skill and experience premia, the costs of displacement for workers with long job tenure, and the nature of unemployment among such workers. For example, our model suggests why skilled workers can remain...

The three most recent downturns, in contrast with other post-war recessions, are characterized by slow recoveries in employment despite positive economic growth. I find that recent recoveries coincide with high uncertainty about economy-wide corporate profits at a time when output begins to rebound, a pattern that was not observed in the earlier recessions. To examine the role of uncertainty in...

This paper develops a theory in which shocks to the effi ciency of information acquisition by financial intermediation translate into business cycle fluctuations via capital reallocation. In our theory, under costly verification, the bank chooses to only monitor the returns of those entrepreneurs with insuffi cient net worth. This distorts the existing capital allocation among entrepreneurs of ...

This paper studies an economy in which incomplete markets and strong complementarities interact to generate path dependent aggregate output fluctuations. An economy is said to be path dependent when the effect of a shock on the level of aggregate output is permanent in the absence of future offsetting shocks. We analyze the evolution of an economy which consists of a countable infinity of indus...

This paper studies aggregate dynamics in a cobweb model where learning takes place through a selection mecanism, by which more successful …rms are replicated at a higher rate. The structure of the model allows to characterize analytically the aggregate dynamics, and to compute the e¤ect on welfare of alternative levels of selectivity. A central aspect is that greater selectivity, while bringing...

In this paper, we investigate the macroeconomic response to exogenous shocks, namely natural disasters and stochastic productivity shocks. To do so, we make use of an endogenous business cycle model in which cyclical behavior arises from the investment–profit instability; the amplitude of this instability is constrained by the increase in labor costs and the inertia of production capacity and t...

We estimate who benefits from local productivity growth. We begin by using confidential plant-level data to calculate changes in manufacturing productivity by United States metropolitan areas (MSAs), and then predict changes in MSA productivity based on MSAs’ initial industry shares and subsequent national changes in productivity by industry. We find that local productivity growth benefits loca...