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Hiring as Investment Behavior

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  • Eran Yashiv

    (Eitan Berglas School of Economics, Tel Aviv University)

Abstract

This paper explores the determinants of hiring at the macroeconomic level It treats the hiring decision as an investment decision, similar to the one taken for physical capital or for financial assets. At its core is a present value relation which defines the worker's "asset value" for the firm and determines optimal hiring. The paper validates this relation using volatility tests and infers the unobserved asset values by estimating it. Hiring and asset values are found to be weakly correlated with the business cycle and to be much more volatile. The paper also demonstrates the links between models employed and issues examined in finance and the labor market. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.1999.0084
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 3 (2000)
Issue (Month): 3 (July)
Pages: 486-522

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Handle: RePEc:red:issued:v:3:y:2000:i:3:p:486-522

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Related research

Keywords: aggregate hiring; present value relation; business cycles; unemployment; structural estimation; asset pricing; hiring subsidies;

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References

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  1. Abowd, John M. & Kramarz, Francis, 2003. "The costs of hiring and separations," Labour Economics, Elsevier, Elsevier, vol. 10(5), pages 499-530, October.
  2. Yashiv, E., 1999. "The Determinants of Equilibrium Unemployment," Papers, Tel Aviv 36-99, Tel Aviv.
  3. Dale T. Mortensen, 1982. "The Matching Process as a Noncooperative Bargaining Game," NBER Chapters, National Bureau of Economic Research, Inc, in: The Economics of Information and Uncertainty, pages 233-258 National Bureau of Economic Research, Inc.
  4. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 268, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. John H. Cochrane, 1992. "Explaining the Variance of Price Dividend Ratios," NBER Working Papers 3157, National Bureau of Economic Research, Inc.
  6. John H. Cochrane, 1991. "Volatility Tests and Efficient Markets: A Review Essay," NBER Working Papers 3591, National Bureau of Economic Research, Inc.
  7. Burda, Michael & Wyplosz, Charles, 1994. "Gross worker and job flows in Europe," European Economic Review, Elsevier, Elsevier, vol. 38(6), pages 1287-1315, June.
  8. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 1029-54, July.
  9. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1993. "International Business Cycles: Theory and Evidence," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 93-21, New York University, Leonard N. Stern School of Business, Department of Economics.
  10. Thomas J. Sargent, 1978. "Estimation of dynamic labor demand schedules under rational expectations," Staff Report, Federal Reserve Bank of Minneapolis 27, Federal Reserve Bank of Minneapolis.
  11. Merz, Monika, 1999. "Heterogeneous job-matches and the cyclical behavior of labor turnover," Journal of Monetary Economics, Elsevier, Elsevier, vol. 43(1), pages 91-124, February.
  12. Abowd, John M & Zellner, Arnold, 1985. "Estimating Gross Labor-Force Flows," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 3(3), pages 254-83, June.
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Citations

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Cited by:
  1. Eran Yashiv, 2005. "Evaluating the Performance of the Search and Matching Model," CEP Discussion Papers, Centre for Economic Performance, LSE dp0677, Centre for Economic Performance, LSE.
  2. Santiago Bazdrech & Frederico Belo & Xiaoji Lin, 2008. "Labor hiring, investment and stock return predictability in the cross section," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 24418, London School of Economics and Political Science, LSE Library.
  3. Yashiv, Eran, 2002. "Macroeconomic Policy Lessons of Labor Market Frictions," IZA Discussion Papers 446, Institute for the Study of Labor (IZA).
  4. Federico S. Mandelman & Francesco Zanetti, 2008. "Estimating general equilibrium models: an application with labour market frictions," Technical Books, Centre for Central Banking Studies, Bank of England, edition 1, number 1.
  5. Yashiv, Eran, 2005. "Evaluating the Performance of the Search and Matching Model," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5363, C.E.P.R. Discussion Papers.
  6. Mühlemann, Samuel & Pfeifer, Harald, 2013. "The Structure of Hiring Costs in Germany: Evidence from Firm-Level Data," IZA Discussion Papers 7656, Institute for the Study of Labor (IZA).
  7. Pietro Garibaldi & Espen Rasumus Moen, 2010. "Competitive on-the-job search," 2010 Meeting Papers, Society for Economic Dynamics 396, Society for Economic Dynamics.
  8. Yashiv, Eran, 2004. "Macroeconomic policy lessons of labor market frictions," European Economic Review, Elsevier, Elsevier, vol. 48(2), pages 259-284, April.
  9. Federico S. Mandelman & Francesco Zanetti, 2008. "Technology shocks, employment, and labor market frictions," Working Paper, Federal Reserve Bank of Atlanta 2008-10, Federal Reserve Bank of Atlanta.
  10. Blatter, Marc & Muehlemann, Samuel & Schenker, Samuel, 2012. "The costs of hiring skilled workers," European Economic Review, Elsevier, Elsevier, vol. 56(1), pages 20-35.
  11. Kilponen , Juha & Vanhala, Juuso, 2009. "Productivity and job flows: Heterogeneity of new hires and continuing jobs in the business cycle," Research Discussion Papers, Bank of Finland 15/2009, Bank of Finland.
  12. Espen R. Moen, 2008. "Industry Dynamics and Search in the Labor Market," 2008 Meeting Papers 572, Society for Economic Dynamics.
  13. Suverato, Davide, 2014. "Export and the Labor Market: a Dynamic Model with on-the-job Search," Discussion Papers in Economics, University of Munich, Department of Economics 20919, University of Munich, Department of Economics.
  14. Blatter, Marc & Mühlemann, Samuel & Schenker, Samuel & Wolter, Stefan C., 2012. "Hiring Costs of Skilled Workers and the Supply of Firm-Provided Training," IZA Discussion Papers 6344, Institute for the Study of Labor (IZA).

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