Hiring Difficulties and Firms' Growth

62 Pages Posted: 11 May 2022 Last revised: 15 May 2023

See all articles by Thomas Le Barbanchon

Thomas Le Barbanchon

Bocconi university; Centre for Economic Policy Research (CEPR)

Maddalena Ronchi

Northwestern University - Kellogg School of Management; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute)

Julien Sauvagnat

Bocconi University; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Date Written: February 8, 2023

Abstract

This paper studies the effect of hiring difficulties on firms' outcomes. We use a shift-share identification strategy combining occupation-specific changes in the difficulty of filling job vacancies within a local labor market (the shifts) and variation across firms in their pre-sampled occupation mix (the shares). We show that hiring difficulties have negative effects on firms' employment, capital, sales, and profits. Firms partially adjust to hiring difficulties by increasing wages and the retention rate of incumbent workers, and by lowering their hiring standards. We then document larger effects of hiring difficulties for labor-intensive firms, firms in expanding sectors, and for non-routine cognitive, high-skill, high-wage, and specialized occupations. Taken together, our findings indicate that hiring difficulties are an important determinant of the growth and profitability of firms across time and space.

Keywords: recruiting difficulties, firm growth, firm performance

JEL Classification: J21, J63, G32, M51

Suggested Citation

Le Barbanchon, Thomas and Ronchi, Maddalena and Sauvagnat, Julien, Hiring Difficulties and Firms' Growth (February 8, 2023). Available at SSRN: https://ssrn.com/abstract=4105264 or http://dx.doi.org/10.2139/ssrn.4105264

Thomas Le Barbanchon (Contact Author)

Bocconi university ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Maddalena Ronchi

Northwestern University - Kellogg School of Management

2001 Sheridan Road
Evanston, IL 60208
United States

IZA Institute of Labor Economics ( email )

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

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Julien Sauvagnat

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

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