Working Paper: NBER ID: w20473
Authors: 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 micro data. 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 TFP shocks estimated from Census data induce significant skewness, movements in volatility and amplification of bad aggregate shocks.
Keywords: employment dynamics; asymmetric responses; hiring rules; TFP shocks; macro volatility
JEL Codes: D2; D8; E20; J2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| concave hiring rules (M51) | firms respond more significantly to bad shocks (H32) |
| firms respond more significantly to bad shocks (H32) | negative skewness in employment growth (J79) |
| negative TFP innovation (O39) | decrease in employment (J63) |
| positive TFP innovation (O39) | increase in employment (J68) |
| asymmetric hiring behavior (J79) | employment growth volatility (J69) |
| concave hiring response (J23) | greater negative skewness in employment growth (J79) |
| TFP innovations (O39) | symmetric shocks (E32) |