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

Cosmin Ilut, Matthias Kehrig, Martin Schneider

NBER Working Paper No. 20473
Issued in September 2014, Revised in May 2017
NBER Program(s):Economic Fluctuations and Growth Program

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.

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Document Object Identifier (DOI): 10.3386/w20473

Published: Cosmin Ilut & Matthias Kehrig & Martin Schneider, 2018. "Slow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News," Journal of Political Economy, vol 126(5), pages 2011-2071.

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