Agency business cycles

Artikel

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Theoretical Economics ; ISSN: 1555-7561 ; Volume: 15 ; Year: 2020 ; Issue: 1 ; Pages: 123-158 ; New Haven, CT: The Econometric Society

Classification and Topics

• Classification: Wirtschaft ; Economics of Contract: Theory ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Business Fluctuations; Cycles
• Subject: Endogenous and stochastic cycles ; coordinated randomization ; unemployment fluctuations

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Golosov, Michail Ju. ; Menzio, Guido
• Event: Veröffentlichung
• (who): The Econometric Society
• (where): New Haven, CT
• (when): 2020

Further information

• DOI: doi:10.3982/TE3379
• Handle: http://hdl.handle.net/10419/217101
• Last update: 10.03.2025, 11:42 AM CET