Handbook of Labor Economics

Market economies experience high rates of job creation and job destruction in almost every time period and sector. Each year, many businesses expand and many others contract. New businesses constantly enter, while others abruptly exit or gradually disappear. Amidst the turbulence of business growth and decline, jobs, workers and capital are continually reallocated among competing activities, organizations and locations. We synthesize the growing body of research on this process, especially as it pertains to the creation and destruction of jobs. We summarize and analyze empirical regularities related to cross-sectional, cross-country and cyclical variation in job flows. We also relate theories of heterogeneity, growth and fluctuations to the large magnitude of job flows and to systematic patterns of cross-sectional and time variation. Other major themes include the connection between job flows and worker flows, creative destruction and the productivity-improving role of factor reallocation, reallocation behavior and consequences in transition economies, and the productivity and welfare effects of policies that impede or encourage job flows.