Cyclical Worker Flows: Cleansing vs. Sullying

John C. Haltiwanger, Henry R. Hyatt, Erika McEntarfer and Matthew Staiger

No 28802, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Do recessions speed up or impede productivity-enhancing reallocation? To investigate this question, we use U.S. linked employer-employee data to examine how worker flows contribute to productivity growth over the business cycle. We find that in expansions high-productivity firms grow faster primarily by hiring workers away from lower-productivity firms. The rate at which job-to-job flows move workers up the productivity ladder is highly procyclical. Productivity growth slows during recessions when this job ladder collapses. In contrast, flows into nonemployment from low productivity firms disproportionately increase in recessions, which leads to an increase in productivity growth. We thus find evidence of both sullying and cleansing effects of recessions, but the timing of these effects differs. The cleansing effect dominates early in downturns but the sullying effect lingers well into the economic recovery.

JEL-codes: E24 E32 J24 J63 J64 (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-bec, nep-lab and nep-mac
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Journal Article: Cyclical Worker Flows: Cleansing vs. Sullying (2025)
Working Paper: Cyclical Worker Flows: Cleansing vs. Sullying (2021)
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