Labor Market Flows in the Cross Section and Over Time

45 Pages Posted: 12 Aug 2011

See all articles by Steven J. Davis

Steven J. Davis

University of Chicago; National Bureau of Economic Research (NBER)

R. Jason Faberman

Federal Reserve Bank of Chicago; Bureau of Labor Statistics - Office of Employment and Unemployment Statistics

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Date Written: August 2011

Abstract

Many theoretical models of labor market search imply a tight link between worker flows (hires and separations) and job gains and losses at the employer level. Partly motivated by these theories, we exploit establishment-level data from U.S. sources to study the relationship between worker flows and job flows in the cross section and over time. We document strong, highly nonlinear relationships of hiring, quit and layoff rates to employer growth in the cross section. Simple statistical models that capture these cross-sectional relationships greatly improve our ability to account for fluctuations in aggregate worker flows. We also evaluate how well various theoretical models and views fit the patterns in the data. Aggregate fluctuations in layoffs are well captured by micro specifications that impose a tight cross-sectional link between worker flows and job flows. Aggregate fluctuations in quits are not. Instead, quit rates rise and fall with booms and recessions across the distribution of establishment growth rates, but more so at shrinking employers. Finally, we use our preferred statistical models - in combination with data on the cross-sectional distribution of establishment growth rates - to construct synthetic JOLTS-type measures of hires, separations, quits and layoffs back to 1990.

Suggested Citation

Davis, Steven J. and Faberman, R. Jason and Haltiwanger, John C., Labor Market Flows in the Cross Section and Over Time (August 2011). NBER Working Paper No. w17294. Available at SSRN: https://ssrn.com/abstract=1908582

Steven J. Davis

University of Chicago ( email )

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National Bureau of Economic Research (NBER)

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R. Jason Faberman

Federal Reserve Bank of Chicago ( email )

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HOME PAGE: http://www.chicagofed.org/webpages/people/faberman_jason.cfm

Bureau of Labor Statistics - Office of Employment and Unemployment Statistics ( email )

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Washington, DC 20212
United States

John C. Haltiwanger

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3504 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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