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Aggregate Recruiting Intensity

Staff Report 553 | Published August 25, 2017

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Authors

Alessandro Gavazza

Giovanni L. Violante

Aggregate Recruiting Intensity

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 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 in response to movements in labor market slackness.

DOI: https://doi.org/10.21034/sr.553


Published In: American Economic Review (Vol. 108, No. 8, August 2018, pp. 2088-2127) https://doi.org/10.1257/aer.20161420

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