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Hiring as Investment Behavior

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  • Eran Yashiv

    (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)

Suggested Citation

  • Eran Yashiv, 2000. "Hiring as Investment Behavior," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 486-522, July.
  • Handle: RePEc:red:issued:v:3:y:2000:i:3:p:486-522
    DOI: 10.1006/redy.1999.0084
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    References listed on IDEAS

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    Cited by:

    1. Samuel Muehlemann & Harald Pfeifer, 2016. "The Structure of Hiring Costs in Germany: Evidence from Firm-Level Data," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(2), pages 193-218, April.
    2. Federico Di Pace & Matthias Hertweck, 2019. "Labor Market Frictions, Monetary Policy, and Durable Goods," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 32, pages 274-304, April.
    3. Marc Blatter & Samuel Muehlemann & Samuel Schenker & Stefan C. Wolter, 2016. "Hiring costs for skilled workers and the supply of firm-provided training," Oxford Economic Papers, Oxford University Press, vol. 68(1), pages 238-257.
    4. Belo, Frederico & Lin, Xiaoji, 2012. "Labor Heterogeneity and Asset Prices: The Importance of Skilled Labor," Working Paper Series 2012-25, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    5. Francesco Furlanetto & Nicolas Groshenny, 2016. "Mismatch Shocks and Unemployment During the Great Recession," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(7), pages 1197-1214, November.
    6. Yashiv, Eran, "undated". "Capital Values, Job Values and the Joint Behavior of Hiring and Investment," Foerder Institute for Economic Research Working Papers 275799, Tel-Aviv University > Foerder Institute for Economic Research.
    7. Frederico Belo & Xiaoji Lin & Santiago Bazdresch, 2014. "Labor Hiring, Investment, and Stock Return Predictability in the Cross Section," Journal of Political Economy, University of Chicago Press, vol. 122(1), pages 129-177.
    8. Davide Suverato, 2014. "Export and the Labor Market: a Dynamic Model with on-the-job Search," Development Working Papers 368, Centro Studi Luca d'Agliano, University of Milano, revised 26 Jun 2014.
    9. Blatter, Marc & Muehlemann, Samuel & Schenker, Samuel, 2012. "The costs of hiring skilled workers," European Economic Review, Elsevier, vol. 56(1), pages 20-35.
    10. Yashiv, Eran, 2006. "Evaluating the performance of the search and matching model," European Economic Review, Elsevier, vol. 50(4), pages 909-936, May.
    11. Yashiv, Eran, 2004. "Macroeconomic policy lessons of labor market frictions," European Economic Review, Elsevier, vol. 48(2), pages 259-284, April.
    12. Federico S. Mandelman & Francesco Zanetti, 2008. "Technology shocks, employment, and labor market frictions," FRB Atlanta Working Paper 2008-10, Federal Reserve Bank of Atlanta.
    13. Pietro Garibaldi & Espen Moen & Dag-Einar Sommervoll, 2016. "Competitive On-the-job Search," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 88-107, January.
    14. Kilponen, Juha & Vanhala, Juuso, 2009. "Productivity and job flows : heterogeneity of new hires and continuing jobs in the business cycle," Research Discussion Papers 15/2009, Bank of Finland.
    15. Robert E. Hall, 2017. "High Discounts and High Unemployment," American Economic Review, American Economic Association, vol. 107(2), pages 305-330, February.
    16. Eran Yashiv, 2016. "Capital Values and Job Values," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 190-209, January.
    17. Francesco Furlanetto & Nicolas Groshenny, "undated". "Mismatch Shocks and Unemployment During the Great Recession," School of Economics Working Papers 2015-14, University of Adelaide, School of Economics.
    18. Suverato, Davide, 2014. "Export and the Labor Market: a Dynamic Model with on-the-job Search," Discussion Papers in Economics 20919, University of Munich, Department of Economics.
    19. 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.
    20. Yannic Stucki & Jacqueline Thomet, 2018. "The effects of firing costs on employment and hours per employee," Diskussionsschriften dp1820, Universitaet Bern, Departement Volkswirtschaft.
    21. Clymo, Alex, 2020. "Discounts, rationing, and unemployment," European Economic Review, Elsevier, vol. 128(C).
    22. Armando Näf & Yannic Stucki & Jacqueline Thomet, 2022. "The Effects of Firing Costs on Labour Market Dynamics," Economica, London School of Economics and Political Science, vol. 89(354), pages 461-488, April.

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    More about this item

    Keywords

    aggregate hiring; present value relation; business cycles; unemployment; structural estimation; asset pricing; hiring subsidies;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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