Worker Flows and Job Flows in Danish Manufacturing, 1980-91

This paper examines turnover of workers and jobs on the panel of all plants in Danish manufacturing for the years 1980-1991. We relate worker turnover to job turnover with a focus on the share of worker reallocation driven by job reallocation, and we consider the behavior of job and worker flows over the business cycle, throwing light on some recent theories of the cyclical behavior of the labor market. The amount of job creation and job destruction is similar in Denmark and the U.S., but job reallocation in Denmark is acyclical contrary to American findings. The probability of plant closure covaries negatively with the business cycle whereas the amount of plant openings varies positively with the business cycle, in particular for small plants. Worker reallocation is strongly procyclical, due to strong procyclicality of replacement hirings (hiring to an existing job). Our findings are consistent with nonconvex adjustment costs for plant hiring and firing, and with models that explain replacement hirings as driven by worker quits, whereas they seem at odds with theories that view recessions as optimal periods for restructuring the plant labor force.