Gibrat's Law of proportionate effect, as applied to firms, states that the growth rate of a firm is independent of its size. Empirical work on firm dynamics finds crucial deviations from Gibrat's Law such as smaller firms growing faster than larger firms (Evans, 1987, and Hall, 1987), a negative...

This paper studies the implications of labor taxation in determining the sensitivity of an economy to macroeconomic shocks. We construct a New Keynesian business cycle model with matching frictions of the labor market, where sluggish employment adjustment implies a key role for labor markets in...

This paper analyses the response of seven of the newly acceded countries (NACs)to EU supply and monetary shocks. A typical NAC perceives an EU technology disturbance as a positive supply shock and an EU monetary expansion as a negative demand shock. When we split the seven countries into two...

This paper revisits the approximate aggregation result of Krusell and Smith (1998). For the stochastic growth model with inelastic labor supply and uninsurable shocks to employment, those authors found that the mean was sufficient to forecast future prices; since prices are known functions of...

Incorporating labor market search in general equilibrium models has been shown to generate realistic dynamics in employment, job creation, and job destruction and to increase the magnitude and persistence of the impact of productivity shocks on output. This paper studies the extent to which the...

This paper studies the cyclical properties the standard Mortensen-Pissarides model of labor search and matching embedded in the real business cycles model with capital, risk-averse agents, and lack of private insurance against unemployment risk. The model enables a direct comparison between the...

This paper investigates the aggregate fluctuations in production and demand components when a firm's investment decision takes the form of (S,s) policies. In the field of large-dimensional non-linear dynamical systems, it is a commonly accepted view that a system of coupled non-linear...

This paper explores the role that recessions play in resource allocation. The conventional cleansing view, advanced by Schumpeter in 1934, argues that recessions promote more efficient resource allocation by driving out less productive units and freeing up resources for better uses. However,...