Current
Research
Update: January 10,2010
In Progress
On The Joint Behavior of Hiring and
Investment
Firms investment
and hiring behavior plays a key role in macroeconomic models of the business
cycle. This paper examines their joint behavior in the aggregate
These series are
highly volatile, highly persistent and display a negative correlation -- investment
rates are pro-cyclical while hiring rates are weakly counter-cylical. The paper
explains this behavior in a Q-type model without resorting to capital market
data. It does so through estimates the optimality conditions driving hiring and
investment. These equate the costs of adjustment and the present values of
benefits the firm faces at the margin.
The estimated
adjustment allow for the interaction of hiring and investment costs. This
interaction proves crucial for the ability to fit the data. The results are
used to derive the present values of hiring and investment. Using a log-linear
approximation, a variance decomposition analysis of these values is undertaken.
It shows that investment and hiring are driven differentially by their determinants
-- the relevant productivites and the relevant discount rates. The former are
important for hiring, the latter for investment.
(with Espen Moen) Worker Matching and
Firm Value
This paper
studies the value of firms and their hiring and firing decisions in an
environment where the productivity of the workers depends on how well they
match with their co-workers and the firm acts as a coordinating device. Match
quality derives from a production technology whereby workers are randomly
located on the Salop circle, and depends negatively on the distance between the
workers. It is shown that a worker's contribution in a given firm changes over
time in a nontrivial way as co-workers are replaced with new workers. The paper
derives optimal hiring and replacement policies, including an optimal stopping
rule, and characterizes the resulting equilibrium in terms of employment, wages
and distribution of firm values. The paper stresses the role of horizontal
differences in worker productivity, as opposed to vertical, assortative
matching issues.
(with Nitsa Kasir) Modernity vs. Tradition
in the Determination of Female Labor Supply
This paper
studies the role played by cultural variables, as distinct from that played by
economic or demographic variables, in determining female labor supply and
market outcomes. The paper is able to study issues hitherto unexplored in this
context by using data on Arab women in
The results point
to a significant role played by culture. In particular, a descriptive analysis,
a standard probit model, and a latent factor model (with modernity as the
latent factor) all indicate that a woman who is more modern participates more. Modernity
is defined by usage of modern technology, modern views on the roles of men and
women in the labor market, life in a modern city, marital status, and fertility.
The cultural variables explain participation almost as well as the standard
variables, such as age, education, and demographic variables.
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