Do plants freeze upon uncertainty shocks?

Konferenzbeitrag

Using quarterly worker flow data of U.S. establishments, we find that an unexpected increase in uncertainty reduces hirings and quits, while it raises layoffs. This finding suggests that the real option effect of uncertainty is less important for employment decisions. Hence plants do not freeze in response to uncertainty shocks. To explain our findings, we propose a multi-worker plant search and matching model with decreasing returns to scale and financial frictions. As a result of unexpected uncertainty increase, plants reduce their employment size in order to decrease the default risk that arises from higher uncertainty in the economy.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2014: Evidenzbasierte Wirtschaftspolitik - Session: Labour Demand ; No. F08-V2

Classification and Topics

• Classification: Wirtschaft ; Labor Demand ; Labor Turnover; Vacancies; Layoffs ; Criteria for Decision-Making under Risk and Uncertainty

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mecikovsky, Ariel Matias ; Meier, Matthias
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel und Hamburg
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/100541
• Last update: 10.03.2025, 11:43 AM CET