Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/106297 
Year of Publication: 
2014
Series/Report no.: 
Working Paper No. 2014:28
Publisher: 
Institute for Evaluation of Labour Market and Education Policy (IFAU), Uppsala
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 primarly downsize through increased separations of both short- and long-tenured workers even when they could have adjusted their employment through reduced hires.
Subjects: 
technology
demand
job creation
rigidities
worker flows
JEL: 
J23
J63
O33
C33
Document Type: 
Working Paper

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