Working Paper: CEPR ID: DP14208
Authors: Benjamin Schoefer; Yusuf Mercan
Abstract: In the canonical DMP model of job openings, all job openings stem from new job creation. Jobs denote worker-firm matches, which are destroyed following worker quits. Yet, employers classify 56% of vacancy postings as quit-driven replacement hiring into old jobs, which evidently outlived their previous matches. Accordingly, aggregate and firm-level hiring tightly tracks quits. We augment the DMP model with longer-lived jobs arising from sunk job creation costs and replacement hiring. Quits trigger vacancies, which beget vacancies through replacement hiring. This vacancy chain can raise total job openings and net employment. The procyclicality of quits can thereby amplify business cycles.
Keywords: Labor Economics; Monetary Economics
JEL Codes: J63; E24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| quits (J63) | vacancies (J63) |
| vacancies (J63) | additional vacancies (replacement hiring) (J63) |
| quits (J63) | additional hires (M51) |
| quits (J63) | total job openings (J68) |
| quits (J63) | net employment (E01) |
| procyclicality of quits (J63) | increased quits (J63) |
| increased quits (J63) | more vacancies (J63) |
| more vacancies (J63) | reduced unemployment (J68) |