Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/217101
Authors: 
Golosov, Michail Ju.
Menzio, Guido
Year of Publication: 
2020
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 15 [Year:] 2020 [Issue:] 1 [Pages:] 123-158
Abstract: 
We develop a theory of endogenous and stochastic fluctuations in economic activity. Individual firms choose to randomize over firing or keeping workers who performed poorly in the past to give them an ex-ante incentive to exert effort. Different firms choose to correlate the outcome of their randomization to reduce the probability with which they fire non-performing workers. Correlated randomization leads to aggregate fluctuations. Aggregate fluctuations are endogenous---they emerge because firms choose to randomize and they choose to randomize in a correlated fashion---and they are stochastic---they are the manifestation of a randomization process. The hallmark of a theory of endogenous and stochastic fluctuations is that the stochastic process for aggregate "shocks" is an equilibrium object.
Subjects: 
Endogenous and stochastic cycles
coordinated randomization
unemployment fluctuations
JEL: 
D86
E24
E32
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/4.0/
Document Type: 
Article

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.