We investigate the role of permanent and transitory shocks for firms and aggregate dynamics. We find that permanent shocks to productivity and permanent shifts in the composition of output explain at least 4/5 of firms dynamics. However, these permanent shocks are almost uncorrelated across firms, and are therefore less relevant for aggregate dynamics. Transitory shocks, on the other hand, are ...

This paper investigates the incidence of limited attention in a high-stakes business setting: a restaurant owner may be unable to purge transitory shocks from noisy profit signals when deciding whether to exit. Combining a 20-year quarterly panel on the alcohol revenues from every restaurant in Texas with weather data, we find that owners with pre-existing experience act as if they are able to ...

The Provision of Wage Insurance by the Firm: Evidence from a Longitudinal Matched Employer-Employee Dataset We evaluate the impact of product market uncertainty on workers wages, addressing the questions: To what extent do firms provide insurance to their workforce, insulating their wages from shocks in product markets? How does the amount of insurance provided vary with firm and worker attribu...

We estimate the marginal propensity to consume (MPC) out of permanent and transitory shocks to house price appreciation. Besides borrowing constraints, we consider two different models under which those shocks may affect consumption. In the first one, we treat housing as a risky asset. In the second one, housing has a role as a consumption and as an investment good. In both, changes in the rate...

Using data from the Health and Retirement Study (HRS) and the English Longitudinal Study of Ageing (ELSA), we estimate a dynamic model of health and employment. We estimate how transitory and persistent health shocks affect employment over time. In a first step, we formulate and estimate a dynamic model of health. The procedure accounts for measurement error and the possibility that people migh...

The neoclassical e®ects of permanent technology shocks on employment is re-investigated. Contrary to Jordi Gali's (1999) assertion published in this Review, I show that standard neoclassical theory is fully capable of explaining the stylized fact that positive permanent technology shocks reduce employment and that positive transitory nontechnology shocks increase labor productivity.

The growth rate of temporary help service employment is often considered to be a leading business cycle indicator because the firing and hiring of temporary help workers typically lead that of permanent workers. However, few studies in the literature focus on the mechanism that generates the lag between temporary and permanent growth. This paper investigates how firms extract signals of long-li...