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Aggregate Recruiting Intensity

  • Alessandro Gavazza
  • Simon Mongey
  • Giovanni L. Violante
American Economic Review
vol. 108, no. 8, August 2018
(pp. 2088-2127)
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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.

Citation

Gavazza, Alessandro, Simon Mongey, and Giovanni L. Violante. 2018. "Aggregate Recruiting Intensity." American Economic Review, 108 (8): 2088-2127. DOI: 10.1257/aer.20161420

Additional Materials

JEL Classification

  • D22 Firm Behavior: Empirical Analysis
  • E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
  • E32 Business Fluctuations; Cycles
  • J23 Labor Demand
  • J41 Labor Contracts
  • J63 Labor Turnover; Vacancies; Layoffs
  • M51 Personnel Economics: Firm Employment Decisions; Promotions