Do plants freeze upon uncertainty shocks?
Ariel Matias Mecikovsky and
VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association
Using quarterly worker flow data of U.S. establishments, we find that an unexpected increase in uncertainty reduces hirings and quits, while it raises layoffs. This finding suggests that the real option effect of uncertainty is less important for employment decisions. Hence plants do not freeze in response to uncertainty shocks. To explain our findings, we propose a multi-worker plant search and matching model with decreasing returns to scale and financial frictions. As a result of unexpected uncertainty increase, plants reduce their employment size in order to decrease the default risk that arises from higher uncertainty in the economy.
JEL-codes: D81 J23 J63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Working Paper: Do Plants Freeze Upon Uncertainty Shocks? (2019)
Working Paper: Do plants freeze upon uncertainty shocks? (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100541
Access Statistics for this paper
More papers in VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().