One of the productive activities engaging the work force is reorganizing. When factors of production are better matched, productivity is higher. The probabilistic matching model of Diamond, Mortensen, and others provides a way to make the idea of reorganization precise. Because the flow of...

If firms purchase capital up to the point where there is no further marginal benefit, and the firms' securities are equal in value to the capital, then the market value of securities measures the quantity of capital. I explore the implications of this hypothesis using data from U.S. non-farm,...

A time series is concentrated if the expectation of its current value is a negative function of a moving average of past values up to all but the most recent past. Job destruction has the property of concentration in a model of heterogeneous jobs because an adverse shock destroys jobs in plants...

Governments determine the size of the unit of value just as they determine the length of the length and weight of physical units of measure. What are the different ways that a government can control the size of the unit of value, that is, control the price level? In general, the government...

In a recession, jobs are destroyed and inventories are liquidated. I concentrate on the intertemporal mechanisms that result in economy-wide job destruction and inventory runoffs. Forces that raise the real interest rate -- especially temporarily -- also cause destruction and runoffs. I consider...

The labor market occupies center stage in modern theories of fluctuations. The most important phenomenon to explain and understand in a recession is the sharp decline in employment and jump in unemployment. This chapter for the Handbook of Macroeconomics considers explanations based on frictions...

What are the fundamental driving forces of macroeconomic fluctuations? In particular, why do people spend more time working in booms and less in recessions? These are basic questions of macroeconomics. Recent thinking has emphasized technology shifts, preference shifts, and changes in government...

This paper sets forth a simple general structural model of aggregate output, the interest rate, and the price level. The core of the model is the determination of the level of output as a product-market equilibrium, either competitive or oligopolistic, possible indeterminate because of...

Spontaneous shifts in output originating within the business sector are an important factor in aggregate fluctuations. This paper develops a simple two-component decomposition of the movement of real GNP. One component is the path that GNP would have followed in order to deliver the volume of...

When economic activity is concentrated over space or over time, it is more efficient. Most production occurs in geographic hot spots, and most production occurs between 9 and 12 in the morning and 1 to 5 in the afternoon on weekdays. The thick-market efficiencies that encourage the concentration...