American Economic Review Vol. 108 No. 8 2018

Aggregate Recruiting Intensity

Alessandro Gavazza¹; Simon Mongey²; Giovanni L. Violante³

¹ London School of Economics, Houghton Street, London, WC2A 2AE, United Kingdom, and CEPR (email: ) · ² Kenneth C. Griffin Department of Economics, University of Chicago, Saieh Hall, 5757 S University Avenue, Chicago, IL 60637 (email: ) · ³ Princeton University, Julis Romo Rabinowitz Building, Princeton, NJ 08544, CEPR, IFS, IZA, and NBER (email: )

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.

DOI

10.1257/aer.20161420

Volume

108

Issue

8

Pages

2088-2127

Language

en

Sources

bibtex:phds-export.bib crossref openalex

Cite

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