Discussion paper

DP17891 Hiring Difficulties and Firm Growth

We estimate the causal impact of hiring difficulties on firms' outcomes. Using a shift-share identification strategy, we show that hiring difficulties have negative effects on firms' employment, capital, sales, and profits. Quantitatively, a one standard deviation change in firm exposure to hiring difficulties explains around 9% of the variation in firm size. Firms partially adjust to hiring difficulties by increasing wages and the retention rate of incumbent workers, and by lowering their hiring standards. The effects of hiring difficulties are larger in expanding sectors, and for non-routine cognitive, high-skill, high-wage, and specialized occupations.


Le Barbanchon, T, M Ronchi and J Sauvagnat (2023), ‘DP17891 Hiring Difficulties and Firm Growth‘, CEPR Discussion Paper No. 17891. CEPR Press, Paris & London. https://cepr.org/publications/dp17891