Collaborative Research on Continuing Research on Establishment-Level Employment and Wage Dynamics in U.S. Manufacturing Industries

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The birth, growth, decline, and death of business establishments is a prominent, pervasive feature of market economies. The specialization of labor resources is another prominent feature of market economies. Taken together, these two observations point to the importance of the continuous reallocation of labor. Despite these features of market economies, the role of establishment-labor demand disturbances in the secular and cyclical behavior of the labor market remains unexplored. In this regard, one key issue is whether fluctuations in intrasectoral labor reallocation driven by establishment-level labor demand disturbances explain large movements in sectoral and aggregate unemployment rates. A second key issue is whether the concentration of employment losses across establishments within a declining sector plays an important role in the behavior of unemployment. The purpose of this project is to investigate these two key issues by combining unemployment data from the Current Population Survey with the newly-created Longitudinal Establishment Datafile (LED) for manufacturing industries. The LED file provides longitudinal data for individual establishments in U.S. manufacturing industries from 1972 to 1983, a period that encompasses three recessions, two major oil price shocks, dramatic shifts in the labor force shares and employment levels of many manufacturing industries, and dramatic movements in unemployment rates. The matched data set well provide researchers investigating a variety of questions about market behavior.