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Vacancy Chains

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Abstract

Replacement hiring—recruitment that seeks to replace positions vacated by workers who quit—plays a central role in establishment dynamics. We document this phenomenon using rich microdata on U.S. establishments, which frequently report no net change in their employment, often for years at a time, despite facing substantial gross turnover in the form of quits. We propose a model in which replacement hiring is driven by the presence of a putty-clay friction in the production structure of establishments. Replacement hiring induces a novel positive feedback channel through which an initial rise in vacancy posting induces still more vacancy posting to replace employees who are poached. This vacancy chain in turn induces volatile responses of vacancies, and thereby unemployment, to cyclical shocks.

Suggested Citation

  • Michael Elsby & Ryan Michaels & David Ratner, 2020. "Vacancy Chains," Working Papers 20-28, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpwp:88450
    DOI: 10.21799/frbp.wp.2020.28
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    More about this item

    Keywords

    Quits; replacement hiring; unemployment; vacancies; business cycles;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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