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Federal Reserve Bank of Minneapolis
Staff Report
Aggregate Recruiting Intensity
Alessandro Gavazza
Simon Mongey
Giovanni L. Violante

We develop an equilibrium model of firm dynamics with random search in the labor market where hiring firms exert recruiting effort by spending resources to fill vacancies faster. Consistent with microevidence, fast-growing firms invest more in recruiting activities and achieve higher job-filling rates. These hiring decisions of firms aggregate into an index of economy-wide recruiting intensity. We study how aggregate shocks transmit to recruiting intensity, and whether this channel can account for the dynamics of aggregate matching efficiency during the Great Recession. Productivity and financial shocks lead to sizable pro-cyclical fluctuations in matching efficiency through recruiting effort. Quantitatively, the main mechanism is that firms attain their employment targets by adjusting their recruiting effort in response to movements in labor market slackness.

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Alessandro Gavazza & Simon Mongey & Giovanni L. Violante, Aggregate Recruiting Intensity, Federal Reserve Bank of Minneapolis, Staff Report 553, 25 Aug 2017.
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Keywords: Aggregate matching efficiency; Firm dynamics; Macroeconomic shocks; Recruiting intensity; Unemployment; Vacancies
DOI: 10.21034/sr.553
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Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

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