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Hiring costs and labor market tightness

Samuel Muehlemann () and Mirjam Strupler Leiser

Labour Economics, 2018, vol. 52, issue C, 122-131

Abstract: We provide new empirical evidence on the magnitude and determinants of a firm’s hiring costs when filling a vacancy for skilled workers. In Switzerland, the average hiring costs amount to about 16 weeks of wage payments. The main components of hiring costs are post-match hiring costs, resulting from the initial low productivity and formal training needed for a new hire (53%), and disruption costs, resulting from the informal instruction of a new hire (26%). Pre-match hiring costs (i.e., search costs) account for just 21% of a firm’s hiring costs. Moreover, we find that search costs are positively associated with labor market tightness (i.e., the v/u ratio), both in the cross-section and over time. Our results will help to calibrate the hiring cost parameter in search models.

Keywords: Hiring cost; Search cost; Adaptation cost; Disruption cost; Vacancy cost; Labor market tightness; Vacancy-unemployment ratio (search for similar items in EconPapers)
JEL-codes: J24 J32 J63 M53 (search for similar items in EconPapers)
Date: 2018
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