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

Author

Listed:
  • Cosmin Ilut

    (Department of Economics, Duke University)

  • Matthias Kehrig

    (Department of Economics, University of Texas at Austin)

  • Martin Schneider

    (Department of Economics, Stanford University)

Abstract

We study the distribution of employment growth when hiring responds more to bad shocks than to good shocks. Such a concave hiring rule endogenously generates higher moments observed in establishment-level Census data for both the cross section and the time series. In particular, both aggregate conditional volatility (“macro-volatility”) and the cross-sectional dispersion of employment growth (“micro-volatility”) are countercyclical. Moreover, employment growth is negatively skewed in the cross section and time series, while TFP is not. The estimated response of employment growth to TFP innovations is sufficiently concave to induce significant skewness as well as movements in volatility of employment growth.

Suggested Citation

  • Cosmin Ilut & Matthias Kehrig & Martin Schneider, 2014. "Slow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News," Department of Economics Working Papers 150113, The University of Texas at Austin, Department of Economics, revised Dec 2014.
    • Handle: RePEc:tex:wpaper:150113
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    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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