Many kinds of economic behavior involve discrete and occasional individual choices. Despite this, econometric partial adjustment models perform relatively well at the aggregate level. Analyzing the classic employment adjustment problem, we show how such microeconomic adjustment is well described...

This paper begins with the observation that the volatility of factor input growth is insufficient to explain the volatility in the growth rate of output, and explores the empirical plausibility of the hypothesis that this fact is due to the presence of productive externalities and increasing...