Working Paper: CEPR ID: DP17891
Authors: Thomas Le Barbanchon; Maddalena Ronchi; Julien Sauvagnat
Abstract: We estimate the causal impact of hiring difficulties on firms' outcomes. Using a shift-share identification strategy, we show that hiring difficulties have negative effects on firms' employment, capital, sales, and profits. Quantitatively, a one standard deviation change in firm exposure to hiring difficulties explains around 9% of the variation in firm size. Firms partially adjust to hiring difficulties by increasing wages and the retention rate of incumbent workers, and by lowering their hiring standards. The effects of hiring difficulties are larger in expanding sectors, and for non-routine cognitive, high-skill, high-wage, and specialized occupations.
Keywords: Hiring difficulties; Labor demand; Firm growth; Firm performance
JEL Codes: J21; J63; M51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| hiring difficulties (J23) | firms' employment (M51) |
| hiring difficulties (J23) | firms' capital (D25) |
| hiring difficulties (J23) | firms' sales (L25) |
| hiring difficulties (J23) | firms' value added (D46) |
| hiring difficulties (J23) | firms' profits (L21) |
| hiring difficulties (J23) | increase wages (J38) |
| hiring difficulties (J23) | increase retention rate of incumbent workers (J63) |
| hiring difficulties (J23) | lower hiring standards (J89) |
| hiring difficulties (J23) | larger effects for labor-intensive firms (J29) |
| hiring difficulties (J23) | larger effects for firms in expanding sectors (L25) |
| hiring difficulties (J23) | larger effects for high-skill occupations (J24) |
| hiring difficulties (J23) | larger effects for specialized occupations (J29) |
| hiring difficulties (J23) | no increase in yearly hours per worker (J29) |