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The Determinants of Hiring in Local Labor Markets: The Role of Demand and Supply Factors

Author

Listed:
  • Eriksson, Stefan

    (Department of Economics)

  • Stadin, Karolina

    (Department of Economics)

Abstract

This paper studies the determinants of hiring. We use the search-matching model with imperfect competition in the product market from Carlsson, Eriksson and Gottfries (2011) to derive an equation for total hiring in a local labor market, and estimate it on Swedish panel data. When product markets are imperfectly competitive, product demand shocks have a direct effect on employment. Our results show that product demand is important for hiring. Moreover, we show that conventional measures of vacancies do not fully capture the effect of product demand on hiring. Finally, we show that the number of unemployed workers has a positive effect on hiring as predicted by search-matching models.

Suggested Citation

  • Eriksson, Stefan & Stadin, Karolina, 2011. "The Determinants of Hiring in Local Labor Markets: The Role of Demand and Supply Factors," Working Paper Series 2011:19, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:2011_019
    as

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    References listed on IDEAS

    as
    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
    2. Patricia M. Anderson & Simon M. Burgess, 1995. "Empirical Matching Functions: Estimation and Interpretation Using Disaggregate Data," NBER Working Papers 5001, National Bureau of Economic Research, Inc.
    3. Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2011. "Introducing financial frictions and unemployment into a small open economy model," Journal of Economic Dynamics and Control, Elsevier, vol. 35(12), pages 1999-2041.
    4. R J Bennett & R R Pinto, 1994. "The Hiring Function in Local Labour Markets in Britain," Environment and Planning A, , vol. 26(12), pages 1957-1974, December.
    5. Forslund, Anders & Johansson, Kerstin, 2007. "Random and stock-flow models of labour market matching - Swedish evidence," Working Paper Series 2007:11, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    6. Burgess, Simon M., 1993. "Labour demand, quantity constraints or matching : The determination of employment in the absence of market-clearing," European Economic Review, Elsevier, vol. 37(7), pages 1295-1314, October.
    7. Pascal Michaillat, 2012. "Do Matching Frictions Explain Unemployment? Not in Bad Times," American Economic Review, American Economic Association, vol. 102(4), pages 1721-1750, June.
    8. Eran Yashiv, 2000. "The Determinants of Equilibrium Unemployment," American Economic Review, American Economic Association, vol. 90(5), pages 1297-1322, December.
    9. Mikael Carlsson & Stefan Eriksson & Nils Gottfries, 2013. "Product market imperfections and employment dynamics," Oxford Economic Papers, Oxford University Press, vol. 65(2), pages 447-470, April.
    10. Coles, Melvyn G & Smith, Eric, 1996. "Cross-Section Estimation of the Matching Function: Evidence from England and Wales," Economica, London School of Economics and Political Science, vol. 63(252), pages 589-597, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Hiring; Search-matching; Imperfect Competition; Unemployment;
    All these keywords.

    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
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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