Vacancy Chains

36 Pages Posted: 14 May 2021 Last revised: 18 Jun 2022

See all articles by Michael Elsby

Michael Elsby

University of Edinburgh

Ryan Michaels

Federal Reserve Bank of Philadelphia

David Ratner

Board of Governors of the Federal Reserve System

Date Written: July, 2020


Replacement hiring—recruitment that seeks to replace positions vacated by workers who quit—plays a central role in establishment dynamics. We document this phenomenon using rich microdata on U.S. establishments, which frequently report no net change in their employment, often for years at a time, despite facing substantial gross turnover in the form of quits. We propose a model in which replacement hiring is driven by the presence of a putty-clay friction in the production structure of establishments. Replacement hiring induces a novel positive feedback channel through which an initial rise in vacancy posting induces still more vacancy posting to replace employees who are poached. This vacancy chain in turn induces volatile responses of vacancies, and thereby unemployment, to cyclical shocks.

Keywords: Quits, replacement hiring, unemployment, vacancies, business cycles

JEL Classification: E32, J63, J64

Suggested Citation

Elsby, Michael and Michaels, Ryan and Ratner, David, Vacancy Chains (July, 2020). FRB of Philadelphia Working Paper No. 20-28, Available at SSRN: or

Michael Elsby (Contact Author)

University of Edinburgh

Old College
South Bridge
Edinburgh, EH8 9JY
United Kingdom

Ryan Michaels

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

David Ratner

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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