Hiring Difficulties and Firm Growth

Department: Finance

Speaker: Julien Sauvagnat (Univ. of Bocconi)

Room: T025

Hiring Difficulties and Firm Growth

Abstract

We estimate the causal impact of hiring difficulties on firms’ outcomes. Using a shift
share identification strategy, we show that hiring difficulties have negative effects
on firms’ employment, capital, sales, and profits. Quantitatively, a one-standarddeviation
change in firm exposure to hiring difficulties explains around 9% of the
variation in firm size. Firms adjust to hiring difficulties by increasing wages and
the retention rate of incumbent workers, and by lowering their hiring standards.
The effects of hiring difficulties are larger in expanding sectors and areas, for labor
intensive and financially-sound firms, and specialized occupations.