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

64 Pages Posted: 4 Mar 2015 Last revised: 21 Jan 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: December 7, 2016

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 level 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 (December 7, 2016). US Census Bureau Center for Economic Studies Paper No. CES-WP-15-02, Available at SSRN: https://ssrn.com/abstract=2573231 or http://dx.doi.org/10.2139/ssrn.2573231

Cosmin L. Ilut (Contact Author)

Duke University ( email )

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

Matthias Kehrig

Duke University ( email )

237 Social Sciences
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Durham, NC 27708-0097
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HOME PAGE: http://sites.google.com/site/matthiaskehrig/research

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Martin Schneider

Stanford University ( email )

Stanford, CA 94305
United States

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