Cyclical Reallocation of Workers Across Employers by Firm Size and Firm Wage

Abstract

Bank of Chile workshop on Wages and Employment Dynamics over the Business Cycle, and seminar participants at Census, Georgetown, NYU, BLS, Wisconsin and Yale, for helpful comments and suggestions. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the U.S. Census Bureau or the National Bureau of Economic Research. All results have been reviewed to ensure that no confidential information is disclosed. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Firm size and business cycles

“…Fourthly, one interesting common characteristic in recent studies for the US is the indication that the job-ladder mechanism stopped working after the 2008 Great Recession [7], [9], [10]. This seems to indicate that under conditions of extreme credit crunch, access to finance constraints are more binding on low wage and small firms, leading to a wave of layoffs that reverses the empirical results related to the job-ladder mechanism.…”

“…More recent studies have contributed to this line of research and provided more insights about the issue of firm size and sensitivity to cycles [1], [7], [8], [9], [10]. Importantly, this new wave of studies also provides robust results based on microdata that allow researchers to control for reclassification bias.…”

“…Firstly, new evidence decomposes net employment growth by firm size into net poaching from other firms and hires from unemployment [7]. This decomposition provides a more detailed view on whether large businesses poach workers from small firms or hire from the pool of unemployed during periods of economic expansion.…”

“…controls for region and year specific characteristics [7], [9]. The use of region-level heterogeneity generates more robust results, indicating that the job-poaching related to job-ladder models does not necessarily mean that high wage firms are more sensitive to business cycles if they experience a smaller decline in net hires from unemployment than low wage firms during recessions [7].…”

“…The use of region-level heterogeneity generates more robust results, indicating that the job-poaching related to job-ladder models does not necessarily mean that high wage firms are more sensitive to business cycles if they experience a smaller decline in net hires from unemployment than low wage firms during recessions [7]. More empirical evidence is needed to confirm whether low wage firms indeed hire proportionately more unemployed workers than high wage firms during recessions.…”