Kiel Working Papers, Kiel Institute for World Economics
No 1709:
Hiring chains and the dynamic behavior of job and worker flows
Christopher Reicher
Abstract: In this paper, I discuss three sets of links which I
uncover in the data on aggregate US job and worker flows. Job flows are
strongly related to aggregate employment growth, while worker flows are
strongly related to employment growth and the unemployment rate. I show
that a simple frictionless business cycle model with heterogeneity and a
simple form of on-the-job search can explain these links. Job flows respond
simply to the cross-section of firm growth, which responds to aggregate
employment growth. Worker flows are related to both employment growth and
the unemployment rate, and quits and hires are particularly tightly related
to each other. Quits and hires interact to form a hiring chain—hires beget
quits through on-the-job search, and quits beget hires to replace quitters.
High unemployment crowds out quits, shortens the hiring chain, reduces the
number of hires, and also results in an elevated layoff rate. The simple
hiring chain model fits the data surprisingly well
Keywords: Job flows, worker flows, heterogeneity, on-the-job search, hiring chain; (follow links to similar papers)
JEL-Codes: E32,; J63,; J21; (follow links to similar papers)
47 pages, June 2011
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