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Aggregate recruiting intensity

Gavazza, Alessandro, Mongey, Simon and Violante, Giovanni L (2016) Aggregate recruiting intensity. CEP discussion paper (CEPDP1449). Centre for Economic Performance (CEP), London, UK.

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Abstract

We develop a 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 micro evidence, in the model fast-growing firms invest more in recruiting activities and achieve higher job-filling rates. In equilibrium, individual decisions of hiring firms aggregate into an index of economy-wide recruiting intensity. We use the model to study how aggregate shocks transmit to recruiting intensity, and whether this channel can account for the dynamics of aggregate matching efficiency around the Great Recession. Productivity and financial shocks lead to sizable pro-cyclical fluctuations in matching efficiency through recruiting effort. Quantitatively, the main mechanism is that firms attain their employment targets by adjusting their recruiting effort as labor market tightness varies. Shifts in sectoral composition can have a sizable impact on aggregate recruiting intensity. Fluctuations in new-firm entry, instead, have a negligible effect despite their contribution to aggregate job and vacancy creations.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2016 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HD Industries. Land use. Labor
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 26 Jan 2017 12:58
Last Modified: 29 Sep 2019 23:26
Projects: CEP Labour Markets Programme
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/69017

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