Hiring as Investment Behavior |
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| Affiliation: | 1. State Key Laboratory of Environmental Chemistry and Ecotoxicology, Research Center for Eco-Environmental Sciences, Chinese Academy of Sciences, Beijing 100085, China;2. School of Environmental Science and Engineering, Hebei University of Science and Technology, Hebei 050018, China;1. Department of Finance, University of Texas at Austin, 2110 Speedway, B6600, Austin TX 78712, USA;2. Economic Research, Federal Reserve Bank of Chicago, 230 South LaSalle Street, Chicago IL 60604, USA;3. Department of Economics, Duke University, 419 Chapel Drive, Durham NC 27708, USA;4. Haskayne School of Business, University of Calgary, 2500 University Dr NW, Calgary AB T2N 1N4, Canada |
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| Abstract: | This paper explores the determinants of hiring at the macroeconomic level. It treats the hiring decision as an investment decision, similar to the one taken for physical capital or for financial assets. At its core is a present value relation which defines the worker's “asset value” for the firm and determines optimal hiring. The paper validates this relation using volatility tests and infers the unobserved asset values by estimating it. Hiring and asset values are found to be weakly correlated with the business cycle and much more volatile. The paper also demonstrates the links between models employed and issues examined in finance and the labor market. |
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