DP14208 Jobs and Matches: Quits, Replacement Hiring, and Vacancy Chains

Author(s): Yusuf Mercan, Benjamin Schoefer
Publication Date: December 2019
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Programme Areas: Labour Economics, Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14208

In the canonical DMP model of job openings, all job openings stem from new job creation. Jobs denote worker-firm matches, which are destroyed following worker quits. Yet, employers classify 56% of vacancy postings as quit-driven replacement hiring into old jobs, which evidently outlived their previous matches. Accordingly, aggregate and firm-level hiring tightly tracks quits. We augment the DMP model with longer-lived jobs arising from sunk job creation costs and replacement hiring. Quits trigger vacancies, which beget vacancies through replacement hiring. This vacancy chain can raise total job openings and net employment. The procyclicality of quits can thereby amplify business cycles.