Papers by Mohamad L . Hammour
RePEc: Research Papers in Economics, May 1, 2004
and Wharton for useful comments. Caballero thanks the NSF for financial support. This is an exten... more and Wharton for useful comments. Caballero thanks the NSF for financial support. This is an extensively revised and transformed version of NBER WP #9831, December 2002. The views expressed herein are those of the author(s) and not necessarily those of the National Bureau of Economic Research.
RePEc: Research Papers in Economics, Oct 1, 1997
Social Science Research Network, 2004
and Wharton for useful comments. Caballero thanks the NSF for financial support. This is an exten... more and Wharton for useful comments. Caballero thanks the NSF for financial support. This is an extensively revised and transformed version of NBER WP #9831, December 2002. The views expressed herein are those of the author(s) and not necessarily those of the National Bureau of Economic Research.
The observation that liquidations are concentrated in recessions has long been the subject of con... more The observation that liquidations are concentrated in recessions has long been the subject of controversy. One view holds that liquidations are beneficial in that they result in increased restructuring. Another view holds that liquidations are privately inefficient and essentially wasteful. This paper proposes an alternative perspective. Based on a combination of theory and empirical evidence on gross job flows and on financial and labor market rents, we find that, cumulatively, recessions result in reduced restructuring, and that this is likely to be socially costly once we consider inefficiencies on both the creation and destruction margins.
This paper analyzes the timing, pace and efficiency of the ongoing job reallocation that results ... more This paper analyzes the timing, pace and efficiency of the ongoing job reallocation that results from product and process innovation. There are strong reasons why an efficient economy ought to concentrate both job creation and destruction during cyclical downturns, when the opportunity cost of reallocation is lowest. Malfunctioning Labor markets can disrupt this synchronized pattern and decouple creation and destruction. Moreover, irrespective of whether workers are too strong or too weak, labor market inefficiencies generally lead to technological "sclerosis," characterized by excessively slow renovation. Government incentives to pmduction may alleviate high unemployment in this economy, but at the cost of exacerbating sclerosis. Creation incentives, on the contrary, increase the pace of reallocation. We show how an optimal combination of both types of policies can restore economic efficiency.
For nearly three decades, Europe’s economic systems have failed to provide adequate employment op... more For nearly three decades, Europe’s economic systems have failed to provide adequate employment opportunities for large segments of the labor force. The unemployment rate in OECD Europe started rising steadily since the early 1970s, and has not dipped below double-digits since the early 1980s. High and persistent unemployment in Europe is arguably the costliest political-economy failure to afflict the Western developed world in the post-war period. One would only expect that a crisis of this magnitude and duration, affecting some of the world’s most developed economies, would have come to some form of resolution three decades after its inception. Although all countries have undertaken some measure of labor-market reforms, unemployment remains the top public-policy issue in the core Continental European economies. Moreover, a disturbing degree of confusion still weighs on the public policy debate. Beyond the usual politically motivated obstacles to clarity, it does seem that intrinsic...
The three essays that make up this thesis are a contribution toward an endogenous theory of econo... more The three essays that make up this thesis are a contribution toward an endogenous theory of economic fluctuations. The first two essays advance some theoretical arguments why the presence of "aggregate increasing returns" can cause macroeconomic instability and place the economy in a state of self-sustained fluctuations. The third essay is an attempt to detect such instability in postwar U.S. data using nonlinear times series estimation techniques.
Palgrave Macmillan UK eBooks, 2001
A growing body of new research has emphasized the macroeconomic consequences of transactional imp... more A growing body of new research has emphasized the macroeconomic consequences of transactional impediments in factor markets, and their role in the recurrent restructuring requirements of modem economies. We first review the function institutional arrangements play in facilitating transactions and explore the macroeconomic consequences of poor institutions. As an application, we discuss the lessons that can be learnt from observed changes in the nature of unemployment in Europe. We then analyze the effect the institutional environment can have on macroeconomic restructuring. In light of this framework we revisit the question of the relationship between recessions and restructuring activity, and review the recent evidence of reduced restructuring following recessions. We also discuss corroborating evidence from "merger waves" in the restructuring of corporate assets.
The Quarterly Journal of Economics, 1996
This paper analyzes the timing, pace and efficiency of the ongoing job reallocation that results ... more This paper analyzes the timing, pace and efficiency of the ongoing job reallocation that results from product and process innovation. There are strong reasons why an efficient economy ought to concentrate both job creation and destruction during cyclical downturns, when the opportunity cost of reallocation is lowest. Malfunctioning Labor markets can disrupt this synchronized pattern and decouple creation and destruction. Moreover, irrespective of whether workers are too strong or too weak, labor market inefficiencies generally lead to technological "sclerosis," characterized by excessively slow renovation. Government incentives to pmduction may alleviate high unemployment in this economy, but at the cost of exacerbating sclerosis. Creation incentives, on the contrary, increase the pace of reallocation. We show how an optimal combination of both types of policies can restore economic efficiency.
There is increasing empirical evidence that creative destruction, driven by experimentation and t... more There is increasing empirical evidence that creative destruction, driven by experimentation and the adoption of new products and processes when investment is sunk, is a core mechanism of development. Obstacles to this process are likely to be obstacles to the progress in standards of living. Generically, underdeveloped and politicized institutions are a major impediment to a well-functioning creative destruction process, and result in sluggish creation, technological “sclerosis, ” and spurious reallocation. Those ills reflect the macroeconomic consequences of contracting failures in the presence of sunk investments. Recurrent crises are another major obstacle to creative destruction. The common inference that increased liquidations during crises result in increased restructuring is unwarranted. Indications are, to the contrary, that crises freeze the restructuring process and that this is associated with the tight financial-market conditions that follow. This productivity cost of re...
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Papers by Mohamad L . Hammour