Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/100541
Authors: 
Mecikovsky, Ariel Matias
Meier, Matthias
Year of Publication: 
2014
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2014: Evidenzbasierte Wirtschaftspolitik - Session: Labour Demand F08-V2
Abstract: 
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: 
J23
J63
D81
Document Type: 
Conference Paper

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