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Firm-Level Shocks and Labour Flows

Author

Listed:
  • Mikael Carlsson
  • Julián Messina
  • Oskar Nordström Skans

Abstract

We analyse how labour flows respond to permanent idiosyncratic shifts in firm-level production functions and demand curves using very detailed Swedish micro data. Shocks to firms’ physical productivity have only modest effects on firm-level employment decisions. In contrast, we document rapid and substantial employment adjustments through hires and separations in response to firm-level demand shocks. The choice of adjustment margin depends on the sign of the shock: firms adjust through increased hires if these shocks are positive and through increased separations if the shocks are negative.

Suggested Citation

  • Mikael Carlsson & Julián Messina & Oskar Nordström Skans, 2021. "Firm-Level Shocks and Labour Flows," The Economic Journal, Royal Economic Society, vol. 131(634), pages 598-623.
    • Handle: RePEc:oup:econjl:v:131:y:2021:i:634:p:598-623.
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    File URL: http://hdl.handle.net/10.1093/ej/ueaa087
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    Cited by:

    1. Michał Gradzewicz, 2022. "How do firms respond to demand and supply shocks?," KAE Working Papers 2022-075, Warsaw School of Economics, Collegium of Economic Analysis.
    2. Ardiyono, Sulistiyo K. & Patunru, Arianto A., 2023. "Firms’ responses to foreign demand shocks: Evidence from Indonesia after the global financial crisis," Economic Modelling, Elsevier, vol. 128(C).
    3. Miller, Jason W. & Phares, Jonathan & Burks, Stephen V., 2023. "Job Creation and Job Destruction Dynamics in the U.S. Truck Transportation Industry, 1995-2019," IZA Discussion Papers 16184, Institute of Labor Economics (IZA).
    4. Filippo Biondi & Sergio Inferrera & Matthias Mertens & Javier Miranda, 2023. "Declining Business Dynamism in Europe: The Role of Shocks, Market Power, and Technology," Jena Economics Research Papers 2023-011, Friedrich-Schiller-University Jena.

    More about this item

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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