Firm-Level Shocks and Labour Flows. Issue 634 (22nd July 2020)

• Record Type: Journal Article
• Authors: Carlsson, Mikael; Messina, Julián; Nordström Skans, Oskar
• Is Part Of: Economic journal. Volume 131:Issue 634(2021)
• Page Start: 598
• Page End: 623
• Publication Date: 2020-07-22
• Subjects: Economics -- Periodicals; Économie politique -- Périodiques; 330.05
• DOI: 10.1093/ej/ueaa087
• Languages: English
• ISSNs: 0013-0133

Abstract

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.