Research Insights: How Do Job and Worker Flows Respond to Firms' Idiosyncratic Technology and Demand Shocks?
Date issued
Feb 2021
Publication
Journal version
Subject
Labor Demand;
Employment Rate;
Labor Market;
Job Creation;
Demand Shock
JEL code
J63 - Turnover • Vacancies • Layoffs;
D22 - Firm Behavior: Empirical Analysis;
J23 - Labor Demand
Country
Sweden
Category
Catalogs and Brochures
Permanent demand shocks are the main driver of labor adjustments. A one standard deviation demand shock increases the net employment rate by 6 percentage points in the long run, while a technology shock increases it by 0.5. Transitory demand shocks have much smaller impacts. When hit by a permanent demand shock, firms adjust fast and symmetrically. Most of the labor change occurs within a year. If the shock is positive, firms adjust by increasing hires. If the shock is negative, they increase separations without reducing hires.