NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Weathering the Great Recession: Variation in Employment Responses by Establishments and Countries

Erling Barth, James Davis, Richard B. Freeman, Sari Pekkala Kerr

NBER Working Paper No. 22432
Issued in July 2016
NBER Program(s):   EFG   LS

This paper finds that US employment changed differently relative to output in the Great Recession and recovery than in most other advanced countries or in the US in earlier recessions. Instead of hoarding labor, US firms reduced employment proportionately more than output in the Great Recession, with establishments that survived the downturn contracting jobs massively. Diverging from the aggregate pattern, US manufacturers reduced employment less than output while the elasticity of employment to gross output varied widely among establishments. In the recovery, growth of employment was dominated by job creation in new establishments. The variegated responses of employment to output challenges extant models of how enterprises adjust employment over the business cycle.

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Document Object Identifier (DOI): 10.3386/w22432

 
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