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Slow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News

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  • Cosmin Ilut
  • Matthias Kehrig
  • Martin Schneider

Abstract

Concave hiring rules imply that firms respond more to bad shocks than to good shocks. They provide a unified explanation for several seemingly unrelated facts about employment growth in macro- and microdata. In particular, they generate countercyclical movement in both aggregate conditional “macro” volatility and cross-sectional “micro” volatility, as well as negative skewness in the cross section and in the time series at different levels of aggregation. Concave establishment-level responses of employment growth to total factor productivity shocks estimated from census data induce significant skewness, movements in volatility, and amplification of bad aggregate shocks.

Suggested Citation

  • Cosmin Ilut & Matthias Kehrig & Martin Schneider, 2018. "Slow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News," Journal of Political Economy, University of Chicago Press, vol. 126(5), pages 2011-2071.
  • Handle: RePEc:ucp:jpolec:doi:10.1086/699189
    DOI: 10.1086/699189
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    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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