Working Paper Series
IFAU - Institute for Evaluation of Labour Market and Education Policy
What are the determinants of hiring? The role of demand and supply factors
() and Karolina Stadin
Abstract: In this paper, we study the relative importance of demand
and supply factors for hiring. We use a search-matching model with
imperfect competition in the product market to derive an equation for total
hiring in a local labor market and estimate it on Swedish panel data. If
product markets are imperfectly competitive, product demand shocks should
have a direct effect on employment. Our main finding is that product demand
is important for hiring. This highlights the importance of taking imperfect
competition in the product market into account in studies of employment
dynamics and hiring. We also find that the number of unemployed workers has
a positive effect on hiring, confirming the importance of search frictions.
Hence, both demand and supply factors seem to matter for hiring.
Keywords: Hiring; search-matching; imperfect competition; unemployment; (follow links to similar papers)
JEL-Codes: E24; J23; J64; (follow links to similar papers)
38 pages, June 17, 2015
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