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

Tuesday, November 20, 2018
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 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.

A journal cover