There are significant differences in the dynamics of employment over the business cycle between young and old manufacturing plants. Young plants are more sensitive to aggregate disturbances, and they respond to them along different margins. We interpret these differences as reflecting greater...

In this paper, we ask how bankruptcy law affects the financial decisions of corporations and its implications for firm dynamics. According to current U.S. law, firms have two bankruptcy options: Chapter 7 liquidation and Chapter 11 reorganization. Using Compustat data, we first document capital...

One of the productive activities engaging the work force is reorganizing. When factors of production are better matched, productivity is higher. The probabilistic matching model of Diamond, Mortensen, and others provides a way to make the idea of reorganization precise. Because the flow of...

Some previous analyses have suggested that the smoothing of tax rates over time would be a desirable guide for public debt management. One implication of this viewpoint is that future changes in tax rates would be unpredictable based on current information. This proposition is tested by...

Complementing existing work on firm organizational structure and productivity, this paper examines the impact of organizational change on workers. We find evidence that employers do appear to compensate at least some of their workers for engaging in high performance workplace practices. We also...

When factors enter into joint-production, they typically develop a degree of specificity with respect to each other. It is well known that, when combined with contracting difficulties, specificity gives rise to a Williamsonian 'Fundamental Transformation' from an ex-ante competitive relationship...

There is increasing empirical evidence that creative destruction, driven by experimentation and the adoption of new products and processes when investment is sunk, is a core mechanism of development. Obstacles to this process are likely to be obstacles to the progress in standards of living....

Whereas Poterba and Summers (1995) find that firms use hurdle rates that are unrelated to their CAPM betas, Graham and Harvey (2001) find that 74% of their survey firms use the CAPM for capital budgeting. We provide an explanation for these two apparently contradictory conclusions. We find that...

Recent trade models determine the equilibrium distribution of firm-level efficiency endogenously and show that freer trade shifts the distribution towards higher average productivity due to entry and exit of firms. These models ignore the possibility that freer trade also alters the firm-size...