Firm-Level Shocks and Labour Flows

Abstract We analyse how labour flows respond to permanent idiosyncratic shifts in firm-level production functions and demand curves using very detailed Swedish micro data. Shocks to firms’ physical productivity have only modest effects on firm-level employment decisions. In contrast, we document rap...

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Bibliographic Details
Published inThe Economic journal (London) Vol. 131; no. 634; pp. 598 - 623
Main Authors Carlsson, Mikael, Messina, Julián, Nordström Skans, Oskar
Format Journal Article
LanguageEnglish
Published Oxford University Press 01.02.2021
Subjects
Vacancies
Layoffs
Labor Demand
Firm Behavior: Empirical Analysis
Turnover
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Summary:Abstract We analyse how labour flows respond to permanent idiosyncratic shifts in firm-level production functions and demand curves using very detailed Swedish micro data. Shocks to firms’ physical productivity have only modest effects on firm-level employment decisions. In contrast, we document rapid and substantial employment adjustments through hires and separations in response to firm-level demand shocks. The choice of adjustment margin depends on the sign of the shock: firms adjust through increased hires if these shocks are positive and through increased separations if the shocks are negative.
ISSN:0013-0133
1468-0297
1468-0297
DOI:10.1093/ej/ueaa087