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Slow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News

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  • Cosmin Ilut
  • Matthias Kehrig
  • Martin Schneider

Abstract

Concave hiring rules imply that firms respond more to bad shocks than to good shocks. They provide a unified explanation for several seemingly unrelated facts about employment growth in macro and micro data. In particular, they generate countercyclical movement in both aggregate conditional “macro” volatility and cross-sectional “micro” volatility, as well as negative skewness in the cross-section and in the time series at different levels of aggregation. Concave establishment-level responses of employment growth to TFP shocks estimated from Census data induce significant skewness, movements in volatility and amplification of bad aggregate shocks.

Suggested Citation

  • Cosmin Ilut & Matthias Kehrig & Martin Schneider, 2014. "Slow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News," NBER Working Papers 20473, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20473
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    Cited by:

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    3. Lautenbacher, Stefan, 2020. "Subjective Uncertainty, Expectations, and Firm Behavior," MPRA Paper 103516, University Library of Munich, Germany.
    4. Calvino, Flavio & Criscuolo, Chiara & Menon, Carlo & Secchi, Angelo, 2018. "Growth volatility and size: A firm-level study," Journal of Economic Dynamics and Control, Elsevier, vol. 90(C), pages 390-407.
    5. Chacko George & Florian Kuhn, 2019. "Business Cycle Implications of Capacity Constraints under Demand Shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 32, pages 94-121, April.
    6. Domenico Ferraro & Giuseppe Fiori, 2018. "The Scarring Effect of Asymmetric Business Cycles," 2018 Meeting Papers 283, Society for Economic Dynamics.
    7. David Berger & Ian Dew-Becker & Stefano Giglio, 2020. "Uncertainty Shocks as Second-Moment News Shocks," Review of Economic Studies, Oxford University Press, vol. 87(1), pages 40-76.
    8. Baqaee, David Rezza, 2020. "Asymmetric inflation expectations, downward rigidity of wages, and asymmetric business cycles," Journal of Monetary Economics, Elsevier, vol. 114(C), pages 174-193.
    9. Cesa-Bianchi, Ambrogio & Pesaran, M Hashem & Rebucci, Alessandro, 2018. "Uncertainty and Economic Activity: A Multi-Country Perspective," CEPR Discussion Papers 12713, C.E.P.R. Discussion Papers.
    10. Nicholas Bloom & Fatih Guvenen & Sergio Salgado, 2016. "Skewed Business Cycles," 2016 Meeting Papers 1621, Society for Economic Dynamics.
    11. Christopher Busch & David Domeij & Fatih Guvenen & Rocio Madera, 2020. "Skewed Idiosyncratic Income Risk over the Business Cycle: Sources and Insurance," Working Papers 1180, Barcelona Graduate School of Economics.
    12. Yu, Edison G., 2018. "Dynamic market participation and endogenous information aggregation," Journal of Economic Theory, Elsevier, vol. 175(C), pages 491-517.
    13. Larry G. Epstein & Yoram Halevy, 2019. "Hard-to-Interpret Signals," Working Papers tecipa-634, University of Toronto, Department of Economics.
    14. Domenico Ferraro, 2018. "The Asymmetric Cyclical Behavior of the U.S. Labor Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 30, pages 145-162, October.
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    16. David Berger & Joseph Vavra, 2017. "Shocks vs. Responsiveness: What Drives Time-Varying Dispersion?," NBER Working Papers 23143, National Bureau of Economic Research, Inc.
    17. Yoo, Donghoon, 2019. "Ambiguous information, permanent income, and consumption fluctuations," European Economic Review, Elsevier, vol. 119(C), pages 79-96.
    18. Ryan Decker & John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2018. "Changing Business Dynamism and Productivity : Shocks vs. Responsiveness," Finance and Economics Discussion Series 2018-007, Board of Governors of the Federal Reserve System (U.S.).
    19. Bachmann, Rüdiger & Elstner, Steffen & Hristov, Atanas, 2017. "Surprise, surprise – Measuring firm-level investment innovations," Journal of Economic Dynamics and Control, Elsevier, vol. 83(C), pages 107-148.
    20. Kölling, Arnd, 2018. "It's not about adjustment costs: Estimating asymmetries in long-run labor demand using a fractional panel probit model," Working Papers 95, Berlin School of Economics and Law, Institute of Management Berlin (IMB).
    21. Guihai Zhao, 2020. "Learning, Equilibrium Trend, Cycle, and Spread in Bond Yields," Staff Working Papers 20-14, Bank of Canada.
    22. Shaowei Ke & Qi Zhang, 2020. "Randomization and Ambiguity Aversion," Econometrica, Econometric Society, vol. 88(3), pages 1159-1195, May.
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    24. Dongya Koh & Raül Santaeulàlia-Llopis, 2017. "Countercyclical Elasticity of Substitution," Working Papers 946, Barcelona Graduate School of Economics.
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    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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