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Hires and Separations in Equilibrium

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Hires and Separations in Equilibrium

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Working Paper Number CES-16-57

Abstract

Hires and Separations in Equilibrium
Download Hires and Separations in Equilibrium [PDF - <1.0 MB]

Hiring occurs primarily to fill vacant slots that occur when workers separate. Equivalently, separation occurs to move workers to better alternatives. A model of efficient separations yields several specific predictions. Labor market churn is most likely when mean wages are low and the variance in wages is high. Additionally, over the business cycle, churn decreases during recessions, with hires falling at the beginning of recessions and separations declining later to match hiring. Furthermore, the young disproportionately bear the brunt of employment declines. More generally, hires and separations are positively correlated over time as well as across industry and firm. These predictions are borne out in the LEHD microdata at the economy and firm level.

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Page Last Revised - October 8, 2021
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