NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Agency Business Cycles

Mikhail Golosov, Guido Menzio

NBER Working Paper No. 21743
Issued in November 2015
NBER Program(s):Economic Fluctuations and Growth

We propose a new business cycle theory. Firms need to randomize over firing or keeping workers who have performed poorly in the past, in order to give them an ex-ante incentive to exert effort. Firms have an incentive to coordinate the outcome of their randomizations, as coordination allows them to load the firing probability on states of the world in which it is costlier for workers to become unemployed and, hence, allows them to reduce overall agency costs. In the unique robust equilibrium, firms use a sunspot to coordinate the randomization outcomes and the economy experiences endogenous, stochastic aggregate fluctuations.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21743

Users who downloaded this paper also downloaded* these:
De Nardi, Fella, and Yang w21730 Piketty's Book and Macro Models of Wealth Inequality
Kozlowski, Veldkamp, and Venkateswaran w21719 The Tail that Wags the Economy: Beliefs and Persistent Stagnation
Trebbi and Xiao w21739 Regulation and Market Liquidity
Amir Ahmadi and Uhlig w21738 Sign Restrictions in Bayesian FaVARs with an Application to Monetary Policy Shocks
Ohanian, Restrepo-Echavarria, and Wright w21744 Bad Investments and Missed Opportunities? Postwar Capital Flows to Asia and Latin America
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us