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  4. Preliminary Program
  5. New Models of Firm and Worker Dynamics
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New Models of Firm and Worker Dynamics

Paper Session

Sunday, Jan. 3, 2021 10:00 AM - 12:00 PM (EST)

Hosted By: American Economic Association
  • Chair: Christian Moser, Columbia University

The Productivity Job Ladder

John C. Haltiwanger
,
University of Maryland
Henry Hyatt
,
U.S. Census Bureau
Erika McEntarfer
,
U.S. Census Bureau
Matthew Staiger
,
University of Maryland

Abstract

In this paper, we use linked employer-employee data for the United States to provide direct evidence on the role of job-to-job flows in reallocating workers from less productive to more productive firms. We show that job-to-job moves generally reallocate employment to more productive firms, accounting for most of the differential employment growth rates between high and low productivity firms. During recessions, productivity-enhancing job-to-job moves decline, while separations to non-employment contribute to productivity enhancing reallocation. The latter arises because the flows from employment to non-employment in downturns disproportionately rises at low productivity firms. In this respect, we find evidence for both a cleansing and sullying effects of recessions. We develop an accounting decomposition to quantify the contribution of the relative cleansing and sullying effects over time. We also explore the extent to which declining worker flows documented in several recent studies has implications for economy-wide productivity growth.

Pay, Employment, and Dynamics of Young Firms

Tania Babina
,
Columbia University
Wenting Ma
,
University of Massachusetts-Amherst
Christian Moser
,
Columbia University
Paige Ouimet
,
University of North Carolina-Chapel Hill
Rebecca Zarutskie
,
Federal Reserve Board

Abstract

Why do young firms pay less? Using confidential microdata from the US Census Bureau, we find lower earnings among workers at young firms. However, we argue that such measurement is likely subject to worker and firm selection. Exploiting the two-sided panel nature of the data to control for relevant dimensions of worker and firm heterogeneity, we uncover a positive and significant young-firm pay premium. Furthermore, we show that worker selection at firm birth is related to future firm dynamics, including survival and growth. We tie our empirical findings to a simple model of pay, employment, and dynamics of young firms.

Application Flows

Steven J. Davis
,
University of Chicago
Brenda Samaniego de la Parra
,
University of Santa Cruz

Abstract

We build a new database that links 125 million applications to 7.5 million job openings posted by 60,000 U.S. employers from 2012 to 2017. Postings fall mainly into computer-related occupations, technology sectors, financial services, and other occupations that require technical skills. We use our new database to uncover several facts about online recruiting and job search behavior: First, the mean posting duration for single-position openings is 9.4 days, about one-fifth of the mean vacancy duration for comparable jobs in JOLTS data. Second, posting duration is insensitive to labor market tightness. Third, jobseekers display a striking propensity to target new postings, directing almost half of applications to openings posted in the past 48 hours. Fourth, jobseekers concentrate their applications on the first day of search. Conditional on continuing to search, they submit application batches of decreasing size at roughly one-week intervals. Fifth, improvements to the online search technology and functions of the online job board during our sample period sharply increased the share of applications directed to smaller employers. Several of these findings are hard to reconcile with standard models of sequential search in the labor market.

How Free is Free Entry?

Fatih Karahan
,
Federal Reserve Bank of New York
Benjamin Pugsley
,
University of Notre Dame
Ayşegül Şahin
,
University of Texas-Austin

Abstract

Standard models of firm dynamics, e.g., Hopenhayn (1992), imply an infinitely elastic supply of potential entrepreneurs through the free entry condition. While this assumption may be reasonable over long horizons, free entry must hold even in the very short-run. Recent work, e.g., Gutierrez and Philippon (2019), questions whether free entry is even appropriate over longer horizons. We propose an empirical test of the free entry condition at short and long horizons using public use tabulations on firms and workers. Applying the test, we find quantitatively significant deviations from free entry at 1 a year horizon, but "free" free entry in the long run. We quantify the short run deviations with an estimated finite elasticity of supply.
JEL Classifications
  • J3 - Wages, Compensation, and Labor Costs
  • E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy