TY  - JOUR
AU  - Caballero,Ricardo J.
AU  - Hammour,Mohamad L.
TI  - The Cost of Recessions Revisited:  A Reverse-Liquidationist View
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7355
PY  - 1999
Y2  - September 1999
UR  - http://www.nber.org/papers/w7355
L1  - http://www.nber.org/papers/w7355.pdf
N1  - Author contact info:
Ricardo J. Caballero
MIT
Department of Economics
Room E52-373a
Cambridge, MA 02142-1347
Tel: 617/253-0489
Fax: 617/253-6915
E-Mail: caball@mit.edu

Mohamad Hammour
Delta
Ecole Nornale Superieurel
48 Boulvard Jourdan
75014 Paris
FRANCE
E-Mail: hammour@DELTA.ENS.FR
AB  - The observation that liquidations are concentrated in recessions has long been the subject of controversy.  One view holds that liquidations are beneficial in that they result in increased restructuring.  Another view holds that liquidations are privately inefficient and essentially wasteful. This paper proposes an alternative perspective.  Based on a combination of theory and empirical evidence on gross job flows and on financial and labor market rents, we find that, cumulatively, recessions result in reduced restructuring, and that this is likely to be socially costly once we consider inefficiencies on both the creation and destruction margins.
ER  -