Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/221607 
Authors: 
Year of Publication: 
1999
Series/Report no.: 
Discussion Paper No. 1251
Publisher: 
Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science, Evanston, IL
Abstract: 
In a seminal paper, Davis and Haltiwanger (1990) demonstrate that recessions are associated with an increase in job reallocation, at least in the manufacturing sector. The conventional view has interpreted this as evidence of "cleansing" effects: less productive jobs are destroyed in recessions, and resources are reallocated towards more productive uses. Thus recessions serve to improve allocative efficiency. This paper shows that when credit market frictions are introduced, the result can be reversed. That is, the most efficient jobs are destroyed in recessions, resourses are reallocated towards less productive uses, and misallocation is exacerbated.
Subjects: 
Credit Market Imperfections
Job Reallocation
the Cleansing effect
JEL: 
E24
E32
E44
Document Type: 
Working Paper

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