Slow to hire, quick to fire: Employment dynamics with asymmetric responses to news

Authors

Ilut, C; Kehrig, M; Schneider, M

Abstract

© 2018 by The University of Chicago. All rights reserved. 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

Ilut, C., M. Kehrig, and M. Schneider. “Slow to hire, quick to fire: Employment dynamics with asymmetric responses to news.” Journal of Political Economy 126, no. 5 (October 1, 2018): 2011–71. https://doi.org/10.1086/699189.