Aggregate Recruiting Intensity
Alessandro Gavazza, Simon Mongey, Giovanni L. Violante
American Economic Review · 2018 · Volume 108 · Issue 8
Abstract
We develop an equilibrium model of firm dynamics with random search in the labor market where hiring firms exert recruiting effort by spending resources to fill vacancies faster. Consistent with microevidence, fast-growing firms invest more in recruiting activities and achieve higher job-filling rates. These hiring decisions of firms aggregate into an index of economy-wide recruiting intensity. We study how aggregate shocks transmit to recruiting intensity, and whether this channel can account for the dynamics of aggregate matching efficiency during the Great Recession. Productivity and financial shocks lead to sizable procyclical fluctuations in matching efficiency through recruiting effort. Quantitatively, the main mechanism is that firms attain their employment targets by adjusting their recruiting effort in response to movements in labor market slackness.
Keywords
Firm Behavior: Empirical Analysis, Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital, Aggregate Labor Productivity, Business Fluctuations, Cycles, Labor Demand, Labor Contracts, Labor Turnover, Vacancies, Layoffs, Personnel Economics: Firm Employment Decisions, Promotions
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