Slow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News
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 microdata. 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 total factor productivity shocks estimated from census data induce significant skewness, movements in volatility, and amplification of bad aggregate shocks.Citation:
Cosmin Ilut, Matthias Kehrig, and Martin Schneider, "Slow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News," Journal of Political Economy 126, no. 5 (October 2018): 2011-2071.