Basic Facts on ReallocationBasic Facts on ReallocationIntroduction• Shocks:–Business Cycle Shocks “common” to all sectors yalthough not common response.– Sectoral shocks: Industry and regionIdiosyncratic shocks–Idiosyncratic shocks• Frictions:–Search/matchingg– Adjustment costs (capital/labor)– Technology adoption costs–Entry/exit• Importance for macro: Growth vs Fluctuations (Emerging vs Advanced)–Growth vs. Fluctuations (Emerging vs. Advanced)– Nonlinear micro + Heterogeneity–Non-representative agent approachJob Creation and DestructionJob Creation and Destruction• Job Creation: Employment gains from py gexpanding and new businesses.• Job Destruction: Employment losses from idiibicontracting and exiting businesses.• Job Flows are SUBSET of worker flows!M i jbfl i l itdi l•Measuring job flows requires longitudinal business data –Data infrastructure projects at Census (LBD, LEHD)Data infrastructure projects at Census (LBD, LEHD) http://lehd.dsd.census.gov/, http://www.bls.gov/bdm/home.htm, http://www bsos umd edu/econ/haltiwanger/downloadhttp://www.bsos.umd.edu/econ/haltiwanger/download.htm, http://www.ces.census.gov/ces.php/homejktjktjktjktXEEg /)(1jktjktjktXaACC /)(jjktsktjktsktgXXPOS0)/(jktjktjktXsSEP /)E .5(E X1-jktjktjktsjgjkt,0sjgjktsktjktsktgXXNEG0||)/(||jktjktjktjktgSEPACCEXCESSW|)0,max(|jktjktjktgACCEXCACCsjgjkt,0kkkNEGPOSNET|)(|jktjktjktg|)0min(|kkkgSEPEXCSEPsktsktsktNEGPOSNETsktsktsktNEGPOSSUM |)0,min(|jktjktjktgSEPEXCSEPsjjktsktjktsktACCXXACC )/(SEPXXSEP)/(||sktsktsktNETSUMEXCESSJsjjktsktjktsktSEPXXSEP)/(sjjktsktjktsktEXCESSWXXEXCESSW )/(j=firm/establishment, k=worker type, s=sectorBasic FactsBasic Facts•Magnitudeg– Relationship to worker flows• Productivity Dynamics?•Concentration•Concentration• Persistence• Idiosyncratic Shocks• Cyclicality• By Plant CharacteristicsAlong the a U S s E rope s Emerging s•Along the way: U.S. vs. Europe vs. Emerging vs. Transition11.012.014.016.0Job Creation Rate (left axis)Job Destruction Rate (left axis)Excess Reallocation MA(5) (right axis)9010.012.08.09.08.010.06.07.06.0405.02.04.03.04.0947950953956959962965968971974977980983986989992995998200120040.011111111111111111122Figure 5. Quarterly Job Flows in Manufacturing, Seasonally Adjusted, 1947-20040.0920.096Job Creation RateJob Destruction Rate0.0880.0800.0840.0760.0680.0720.064199019911992199319941995199619971998199920002001200220032004Quarterly Job Flows in the U.S. Private Sector, Seasonally Adjusted, 1990-2004MagnitudeMagnitude•Quarterly: Approximately 6%Quarterly: Approximately 6%• Annual: Approximately 11%•Five-year: Approximately 35%Five-year: Approximately 35%• Ten-year: Approximately 60%•Varies SUBSTANTIALLY by industry and•Varies SUBSTANTIALLY by industry and plant characteristic•Important transitory and permanent•Important transitory and permanent components•About 1/3 to 1/2 of Worker FlowsAbout 1/3 to 1/2 of Worker FlowsA. Job Flow RatesData SourceTime PeriodSampling IntervalJob CreationJobDestructionJOLTSDecember 2000 – January JOLTS, continuous units y2004Monthly 1.5 1.5BED March 1990 –June 2003 Quarterly 8.0 7.7B. Worker Flow RatesHires SeparationsTime PeriodData SourceTime PeriodSamplingIntervalJOLTS,continuous units December 2000 – January 2004 Monthly 3.2 3.1LEHD, selected states,full-quarter cases 1993:2 to2003:3, Quarterly 13.2 10.7LEHD l d1993:2 toLEHD, selected states, cumulative flows1993:2 to2003:3Quarterly 25.0 24.0Table: Gross Reallocation of Outputs and Inputs in U.S. Manufacturing and Retail TradeMeasureCreationShare ofDestructionShare ofFraction ofMeasureCreation(Expansion)RateShare ofCreation(Expansion)Due toEntrantsDestruction(Contraction)RateShare ofDestruction(Contraction)Due to ExitsFraction ofExcessReallocationWithin 4-digitIndustryEntrantsIndustryManufacturing, 1977-87Real GrossOt t49.4 0.44 34.4 0.61 0.80OutputEmployment 39.4 0.58 45.8 0.62 0.75Capital 46.1 0.42 37.1 0.51 0.71pEquipmentCapitalStructures44.9 0.44 48.4 0.42 0.69Retail Trade, 1987-97Employment 70.3 0.85 55.7 0.83 0.96Real Output 72.6 0.81 46.6 0.80 0.98Source: Tabulations from the Census of Retail Trade and Census of ManufacturersCountry Period Coverage Employer Unit JobCrea-tionJobDestruc-tionNet GrowthAustralia 1984-85 Manufacturing Establishments 16.1 13.2 3.9 Canada1974 92ManufacturingEstablishments10 911 102Canada1974-92ManufacturingEstablishments10.9 11.1 -0.2 Canada 1983-91 All Employees Firms 14.5 11.9 2.6 Chile 1976-86 Manufacturing Establishments 13.0 13.9 -1.0 Colombia 1977-91 Manufacturing Establishments 12.5 12.2 0.3Denmark 1983-89 Private SectorEstablishments 16.0 13.8 2.2 Denmark 1981-91 Manufacturing Establishments 12.0 11.5 0.5 Estonia 1992-94 All Employees Firms 9.7 12.9 -2.2Finland 1986-91 All Employees Establishments 10.4 12.0 -1.6 France 1984-92 Private Sector Establishments 13.9 13.2 0.6 France 1985-91 Manufacturing Firms 10.2 11.0 -0.8France11985-91 Nonmanufacturing Firms 14.3 11.8 2.4Germany 1983-90 All Employees Establishments 9.0 7.5 1.5 Germany(LowerSaxony)1979-93 Manufacturing Establishments 4.5 5.2 -0.7Saxony)Italy21984-93 Private Sector Firms 11.9 11.1 0.8 Israel 1971-72 Manufacturing Establishments 9.7 8.2 1.5Morocco 1984-89 Manufacturing Firms 18.6 12.1 6.5 Netherlands 1979-93 Manufacturing Firms 7.3 8.3 -1.0 New Zealand 1987-92 Private SectorEstablishments 15.7 19.8 -4.1 Norway1976-86 Manufacturing Establishments 7.1 8.4 -1.2 Sweden 1985-92 All Employees Establishments 14.5 14.6 -0.1 USA 1973-93 Manufacturing Establishments 8.8 10.2 -1.3 USA31979 83Private SectorEstablishments11 49914USA31979-83Private SectorEstablishments11.4 9.91.4 USAc1979-83 Manufacturing Establishments 10.2 11.5 -1.3 United Kingdom 1985-91 All Employees Firms 8.7 6.6 2.1Colombia02Brazil0250050.10.150.2Rateposneg0.10.150.20.25Rateposneg00.051980 1985 1990 1995 2000 2005Y00.051991 1993 1995 1997 1999 2001gYearChileYearMexicoChile020.3pos0150.20.250.3tepos00.10.2Rateposneg00.050.10.15199119931995199719992001Ratpneg1980 1985 1990 1995 2000 2005Year199119931995199719992001YearAverage Quarterly Job Flow Rates in the BED, 1990:2 – 2003:2Job Creation Job Destruction Net GrowthTlPi807703Total Private8.07.70.3Resources 19.7 19.8 -0.1Construction 14.3 14.0 0.4fiManufacturing 4.9 5.3 -0.4Wholesale Trade 6.8 6.7 0.1Retail Trade 8.1 7.9