Inefficient continuation decisions, job creation costs, and the cost of business cycles

• 成果类型: Article
• 署名作者: Den Haan, Wouter J.; Sedlacek, Petr
• 署名单位: University of London; London School Economics & Political Science; University of London; London School Economics & Political Science; Center for Economic & Policy Research (CEPR); University of Bonn
• 刊物名称: QUANTITATIVE ECONOMICS
• ISSN/ISSBN: 1759-7323
• DOI: 10.3982/QE253
• 发表日期: 2014
• 页码: 297-349
• 关键词: Agency problem; welfare; permanent job loss

摘要

This paper develops a model according to which the costs of business cycles are nontrivial because they reduce the average level of output. The reason is an interaction between job creation costs and an agency problem. The agency problem triggers separations during economic downturns even though both the employer and the worker would be better off if the job was not discontinued, that is, affected jobs have strictly positive surplus values. Similarly, booms make it possible for more jobs to overcome the agency problem. These effects do not offset each other, because business cycles reduce the expected job duration for these jobs. With positive job creation costs, business cycles then reduce the creation of valuable jobs and lower average activity levels. Considering a wide range of parameter values, we find estimates for the cost of business cycles ranging from 2.03% to 12.7% of gross domestic product.