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Aggregate recruiting intensity

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  • Gavazza, Alessandro
  • Mongey, Simon
  • Violante, Giovanni L

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

  • Gavazza, Alessandro & Mongey, Simon & Violante, Giovanni L, 2016. "Aggregate recruiting intensity," LSE Research Online Documents on Economics 69017, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:69017
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    References listed on IDEAS

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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. Carlos Carrillo-Tudela & Hermann Gartner & Leo Kaas, 2020. "Recruitment Policies, Job-Filling Rates and Matching Efficiency," CESifo Working Paper Series 8299, CESifo.
    3. Smirnyagin, Vladimir, 2020. "Compositional nature of firm growth and aggregate fluctuations," Bank of England working papers 846, Bank of England.
    4. 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.
    5. Golosov, Mikhail & Menzio, Guido, 2020. "Agency business cycles," Theoretical Economics, Econometric Society, vol. 15(1), January.
    6. Vladimir Smirnyagin, 2020. "Compositional Nature of Firm Growth and Aggregate Fluctuations," Working Papers 20-09, Center for Economic Studies, U.S. Census Bureau.
    7. Martin Beraja, 2017. "Counterfactual Equivalence in Macroeconomics," 2017 Meeting Papers 1400, Society for Economic Dynamics.
    8. 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.
    9. 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.
    10. 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.
    11. Yan Ji, 2017. "Job Search under Debt: Aggregate Implications of Student Loans," 2017 Meeting Papers 222, Society for Economic Dynamics.
    12. Pizzinelli, Carlo & Speigner, Bradley, 2017. "Matching efficiency and labour market heterogeneity in the United Kingdom," Bank of England working papers 667, Bank of England.
    13. Satoshi Tanaka & Lawrence Warren & David Wiczer, 2020. "Earnings Growth, Job Flows and Churn," Working Papers 20-15, Center for Economic Studies, U.S. Census Bureau.
    14. Wesselbaum, Dennis, 2019. "Jobless recoveries: The interaction between financial and search frictions," Journal of Macroeconomics, Elsevier, vol. 61(C), pages 1-1.
    15. Joao Ayres & Gajendran Raveendranathan, 2018. "The Firm Dynamics of Business Cycles," Department of Economics Working Papers 2018-16, McMaster University.
    16. 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.
    17. Barrero, Jose Maria, 2020. "The Micro and Macro of Managerial Beliefs," SocArXiv fctsb, Center for Open Science.
    18. Paolo Martellini & Guido Menzio, 2018. "Declining Search Frictions, Unemployment and Growth," NBER Working Papers 24518, National Bureau of Economic Research, Inc.
    19. Compton, Andrew, 2019. "A Search Theoretic Model of Part-Time Employment and Multiple Job Holdings," MPRA Paper 97003, University Library of Munich, Germany.

    More about this item

    Keywords

    Aggregate Matching Efficiency; Firm Dynamics; Macroeconomic Shocks; Recruiting Intensity; Unemployment; Vacancies;

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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