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

61 Pages Posted: 10 Feb 2017 Last revised: 27 Apr 2017

See all articles by Cosmin L. Ilut

Cosmin L. Ilut

Duke University

Matthias Kehrig

Duke University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Martin Schneider

Stanford University

Multiple version iconThere are 4 versions of this paper

Date Written: April 25, 2017

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: business cycles, time varying volatility, asymmetric adjustment, skewness

JEL Classification: D2, D8, E2, J2

Suggested Citation

Ilut, Cosmin L. and Kehrig, Matthias and Schneider, Martin, Slow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News (April 25, 2017). Available at SSRN: https://ssrn.com/abstract=2304442 or http://dx.doi.org/10.2139/ssrn.2304442

Cosmin L. Ilut

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

HOME PAGE: http://econ.duke.edu/~cli2/index.html

Matthias Kehrig (Contact Author)

Duke University ( email )

237 Social Sciences
Box 90097
Durham, NC 27708-0097
United States

HOME PAGE: http://sites.google.com/site/matthiaskehrig/research

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Martin Schneider

Stanford University ( email )

Stanford, CA 94305
United States

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