Countercyclical Recruiting Rates and the Value of Jobs

71 Pages Posted: 12 Oct 2015

See all articles by Eran Yashiv

Eran Yashiv

Tel Aviv University - Eitan Berglas School of Economics; CEP, LSE; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Abstract

U.S. CPS gross flows data indicate that in recessions firms actually increase their hiring rates from the pools of the unemployed and out of the labor force. Why so? The paper provides an explanation by studying the optimal recruiting behavior of the representative firm. This behavior is a function of the value of jobs, i.e., the expected present value of the marginal worker to the firm. Job values are estimated to be counter-cyclical in U.S. data, the underlying reason being the dynamic behavior of the labor share of GDP. The counter-cyclicality of hiring rates and job values, which may appear counter-intuitive, is shown to be consistent with well-known business cycle facts, such as pro-cyclical employment and pro-cyclical vacancy and job-finding rates (as well as job to job flows). The analysis emphasizes the difference between current labor productivity and the forward-looking concept of job value. The paper explains the high volatility of firm recruiting behavior, as well as the reduction in labor market fluidity in the U.S. over time, using the same framework.

Keywords: firm recruitment, job values, business cycles, vacancies, hiring, labor market frictions, volatility, labor market fluidity

JEL Classification: E24, E32

Suggested Citation

Yashiv, Eran, Countercyclical Recruiting Rates and the Value of Jobs. IZA Discussion Paper No. 9364, Available at SSRN: https://ssrn.com/abstract=2672150 or http://dx.doi.org/10.2139/ssrn.2672150

Eran Yashiv (Contact Author)

Tel Aviv University - Eitan Berglas School of Economics ( email )

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HOME PAGE: http://www.tau.ac.il/~yashiv/

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IZA Institute of Labor Economics

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Centre for Economic Policy Research (CEPR)

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