Firm-Level Shocks and Labor Adjustments

Mikael Carlsson, Julian Messina and Oskar Skans

No 2014:13, Working Paper Series, Center for Labor Studies from Uppsala University, Department of Economics

Abstract: We analyze how firms adjust their labor in response to idiosyncratic shifts in their production function and demand curves using a unique data-set of Swedish manufacturing firms. We show that permanent shocks to firm-level demand is a main driving force behind both job and worker reallocation. In contrast, shocks to physical productivity and temporary demand shocks have a very limited impact on firm-level employment despite being important determinants of other firm-level fundamentals. We also present evidence suggesting that the adjustment to permanent demand shocks is fairly unconstrained. Most notably, firms primarily downsize through increased separations of both short- and long-tenured workers even when they could have adjusted their employment through reduced hires.

Keywords: Technology; Demand; Job Creation; Rigidities; Worker Flows (search for similar items in EconPapers)
JEL-codes: C33 J23 J63 O33 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2014-12-02
New Economics Papers: this item is included in nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Working Paper: Firm-level shocks and labor adjustments (2014)
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