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What are the determinants of hiring? The role of demand and supply factors

Author

Listed:
  • Eriksson, Stefan

    (Department of Economics, Uppsala University)

  • Stadin, Karolina

    (Department of Economics, Uppsala University)

Abstract

In this paper, we study the relative importance of demand and supply factors for hiring. We use a search-matching model with imperfect competition in the product market to derive an equation for total hiring in a local labor market and estimate it on Swedish panel data. If product markets are imperfectly competitive, product demand shocks should have a direct effect on employment. Our main finding is that product demand is important for hiring. This highlights the importance of taking imperfect competition in the product market into account in studies of employment dynamics and hiring. We also find that the number of unemployed workers has a positive effect on hiring, confirming the importance of search frictions. Hence, both demand and supply factors seem to matter for hiring.

Suggested Citation

  • Eriksson, Stefan & Stadin, Karolina, 2015. "What are the determinants of hiring? The role of demand and supply factors," Working Paper Series 2015:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    • Handle: RePEc:hhs:ifauwp:2015_014
    DOI: 10.1080/00036846.2017.1302058
    Note: Publicerad i: Applied Economics, 2017, vol. 49, no. 50, pp.5144-5165, https://doi.org/10.1080/00036846.2017.1302058
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    References listed on IDEAS

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    Cited by:

    1. Stadin, Karolina, 2015. "Firms’ employment dynamics and the state of the labor market," Working Paper Series 2015:20, IFAU - Institute for Evaluation of Labour Market and Education Policy.

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    More about this item

    Keywords

    Hiring; search-matching; imperfect competition; unemployment;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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