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Title: The Slowdown in Business Employment Dynamics: The Role of Changing Skill Demands

Citation Type: Miscellaneous

Publication Year: 2013

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Abstract: This paper studies the observed slowdown in the US business employment dynamics over recent decades. I propose and quantitatively evaluate the hypothesis that on-the-job human capital accumulation has become important over time. Indirect empirical support for this hypothesis relates to secular trends of rising educational attainment and changing skill demands due to technical advances. The paper also provides more direct and novel empirical evidence, showing that job training requiremnts have risen over time. I construct a multi-worker search and matching model with endogenous separations, where training investments act as adjustment costs. The model can explain how the increase in training requiremnts accounts for the decline in job turnover, the increase in inaction, and the evolution towards a more compressed employment growth distribution, all consistent with the data. Quantitatively, the observed increase in training costs can explain almost one-third of the decline in the job reallocation rate over the last few decades. the key mechanism is that higher job training requirements make firms reluctant to hire and fire workers when economic conditions change, resulting in lower turnover.

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Authors: Cairo, Isabel

Publisher: Universitat Pompeu Fabra

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure

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