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Aggregate Recruiting Intensity

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  • Alessandro Gavazza
  • Simon Mongey
  • Giovanni L. Violante

Abstract

We develop a model of firm dynamics with random search in the labor market where hiring firms exert recruiting effort by spending resources to fill vacancies faster. Consistent with micro evidence, in the model fast-growing firms invest more in recruiting activities and achieve higher job-filling rates. In equilibrium, individual decisions of hiring firms aggregate into an index of economy-wide recruiting intensity. We use the model to study how aggregate shocks transmit to recruiting intensity, and whether this channel can account for the dynamics of aggregate matching efficiency around the Great Recession. Productivity and financial shocks lead to sizable pro-cyclical fluctuations in matching efficiency through recruiting effort. Quantitatively, the main mechanism is that firms attain their employment targets by adjusting their recruiting effort as labor market tightness varies. Shifts in sectoral composition can have a sizable impact on aggregate recruiting intensity. Fluctuations in new-firm entry, instead, have a negligible effect despite their contribution to aggregate job and vacancy creations.

Suggested Citation

  • Alessandro Gavazza & Simon Mongey & Giovanni L. Violante, 2016. "Aggregate Recruiting Intensity," CEP Discussion Papers dp1449, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1449
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    Cited by:

    1. Erin Wolcott, 2018. "Employment Inequality: Why Do the Low-Skilled Work Less Now?," 2018 Meeting Papers 487, Society for Economic Dynamics.
    2. Karahan, Fatih & Mitman, Kurt & Moore, Brendan, 2019. "Individual and Market-Level Effects of UI Policies: Evidence from Missouri," CEPR Discussion Papers 14158, C.E.P.R. Discussion Papers.
    3. Golosov, Mikhail & Menzio, Guido, 2020. "Agency business cycles," Theoretical Economics, Econometric Society, vol. 15(1), January.
    4. Martin Beraja, 2017. "Counterfactual Equivalence in Macroeconomics," 2017 Meeting Papers 1400, Society for Economic Dynamics.
    5. Merkl, Christian, 2019. "Hartz IV and the Decline of German Unemployment: A Macroeconomic Evaluation," Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203549, Verein für Socialpolitik / German Economic Association.
    6. Sushant Acharya & Shu Lin Wee, 2020. "Rational Inattention in Hiring Decisions," American Economic Journal: Macroeconomics, American Economic Association, vol. 12(1), pages 1-40, January.
    7. Yan Ji, 2017. "Job Search under Debt: Aggregate Implications of Student Loans," 2017 Meeting Papers 222, Society for Economic Dynamics.
    8. Pizzinelli, Carlo & Speigner, Bradley, 2017. "Matching efficiency and labour market heterogeneity in the United Kingdom," Bank of England working papers 667, Bank of England.
    9. Wesselbaum, Dennis, 2019. "Jobless recoveries: The interaction between financial and search frictions," Journal of Macroeconomics, Elsevier, vol. 61(C), pages 1-1.
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    11. Tania Babina & Wenting Ma & Christian Moser & Paige Ouimet & Rebecca Zarutskie, 2019. "Pay, Employment, and Dynamics of Young Firms," Working Papers 19-23, Center for Economic Studies, U.S. Census Bureau.
    12. Andreas Kettemann & Andreas I. Mueller & Josef Zweimüller, 2018. "Vacancy durations and entry wages: evidence from linked vacancy-employer-employee data," ECON - Working Papers 312, Department of Economics - University of Zurich.
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    14. Compton, Andrew, 2019. "A Search Theoretic Model of Part-Time Employment and Multiple Job Holdings," MPRA Paper 97003, University Library of Munich, Germany.
    15. Carrillo-Tudela, Carlos & Gartner, Hermann & Leo, Kaas, "undated". "Recruitment Policies, Job-Filling Rates and Matching Efficiency," IAB Discussion Paper 202015, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
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    17. Barrero, Jose Maria, 2020. "The Micro and Macro of Managerial Beliefs," SocArXiv fctsb, Center for Open Science.

    More about this item

    Keywords

    aggregate matching efficiency; firm dynamics; macroeconomic shocks; recruiting intensity; unemployment; vacancies;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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