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JOB FLOWS AND PRODUCTIVITY DYNAMICS: EVIDENCE FROM U.S. MANUFACTURING

Published online by Cambridge University Press:  19 March 2007

CHRISTOPHER H. WHEELER
CHRISTOPHER H. WHEELER
Affiliation:
Federal Reserve Bank of St. Louis
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Abstract

Through their influence on the cross-sectional distribution of productivity across firms and workers, job creation and destruction likely have an impact on the rate at which aggregate productivity changes over time. However, the nature of this effect is not, a priori, clear. Although a broad consensus has emerged suggesting that job destruction enhances productivity by eliminating inefficient production units, theories disagree with regard to the effect of job creation. If job flows represent the reallocation of labor from low- to high-productivity positions, job creation would boost productivity growth. If, instead, they represent changes in employment along a primarily low-skill dimension, the effect would be negative. This paper estimates the influence of job creation and destruction on total factor productivity (TFP) growth using annual data on four-digit U.S. manufacturing. As expected, the results reveal a positive association between job destruction and changes in TFP. Yet, they also indicate that job creation tends to have a negative effect on productivity growth.

Keywords

Productivity GrowthJob FlowsCreative DestructionJob Matching
Type
ARTICLES
Information
Macroeconomic Dynamics , Volume 11 , Issue 2 , April 2007 , pp. 175 - 201
Copyright
© 2007 Cambridge University Press

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