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Hires and Separations in Equilibrium

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  • Edward P. Lazear
  • Kristin McCue

Abstract

Hiring occurs primarily to fill vacant slots that occur when workers separate. Equivalently, separation occurs to move workers to better alternatives. A model of efficient separations yields several specific predictions. Labor market churn is most likely when mean wages are low and the variance in wages is high. Additionally, over the business cycle, churn decreases during recessions, with hires falling at the beginning of recessions and separations declining later to match hiring. Furthermore, the young disproportionately bear the brunt of employment declines. More generally, hires and separations are positively correlated over time as well as across industry and firm. These predictions are borne out in the LEHD microdata at the economy and firm level.

Suggested Citation

  • Edward P. Lazear & Kristin McCue, 2016. "Hires and Separations in Equilibrium," Working Papers 16-57, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:16-57
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    Cited by:

    1. Yusuf Mercan & Benjamin Schoefer, 2020. "Jobs and Matches: Quits, Replacement Hiring, and Vacancy Chains," American Economic Review: Insights, American Economic Association, vol. 2(1), pages 101-124, March.
    2. Bachmann, Rüdiger & Bayer, Christian & Merkl, Christian & Seth, Stefan & Stüber, Heiko & Wellschmied, Felix, 2021. "Worker churn in the cross section and over time: New evidence from Germany," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 781-797.
    3. Bachmann, Rüdiger & Bayer, Christian & Merkl, Christian & Seth, Stefan & Stüber, Heiko & Wellschmied, Felix, 2017. "Worker Churn and Employment Growth at the Establishment Level," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168162, Verein für Socialpolitik / German Economic Association.
    4. Georgeanne M. Artz & Liesl Eathington & Jasmine Francois & Melvin Masinde & Peter F. Orazem, 2020. "Churning in Rural and Urban Retail Markets," The Review of Regional Studies, Southern Regional Science Association, vol. 50(1), pages 110-126.
    5. Luz A. Flórez & Leonardo Fabio Morales & Daniel Medina & José Lobo, 2021. "Labor flows across firm size, age, and economic sector in Colombia vs. the United States," Small Business Economics, Springer, vol. 57(3), pages 1569-1600, October.
    6. Luz Adriana Flórez & Leonardo Morales Z & Daniel Medina & José Lobo C, 2017. "Labour flows across firm´s size, economic sectors and wages in Colombia: evidence from employer-employee linked panel," Borradores de Economia 1013, Banco de la Republica de Colombia.
    7. Todd Schoellman & Jianyu Lu & Kevin Donovan, 2017. "Firm Size Distributions and Cross-Country Labor Market Outcomes," 2017 Meeting Papers 1571, Society for Economic Dynamics.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • M0 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General
    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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