Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Table 1 Cross-Correlations a. levels ( h n ) t , ( i k ) t � i lag correlation lead correlation 0 -0.60 0 -0.60 1 -0.58 1 -0.59 4 -0.49 4 -0.56 8 -0.37 8 -0.55 12 -0.27 12 -0.60 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Table 1 Cross-Correlations b. Logged, HP-…ltered ( h n ) t , ( i k ) t � i lag correlation lead correlation 0 -0.15 0 -0.15 1 -0.18 1 -0.15 4 -0.07 4 0.02 8 -0.10 8 0.10 12 -0.09 12 -0.03 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Hiring and investment are highly persistent and highly volatile; investment is more so. Table 2 Volatility and Persistence of Gross Hiring and Investment Rates h i moment n k std of log 0.10 0.15 AC 1 lag 0.93 0.97 AC 4 lag 0.85 0.82 AC 8 lags 0.73 0.60 AC 12 lags 0.67 0.46 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work They are more volatile than the cyclical measures. Table 3 Co-Movement of Gross Hiring and Investment Rates with Key Variables a. Volatility and Relative Volatility – HP …ltered h i moment n k std of log 0 . 024 0 . 053 relative std to GDP f 1 . 21 2 . 63 relative std to f 1 . 99 4 . 33 n relative std to f 1 . 11 2 . 41 k Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work b. Co-Movement (contemporaneous) – HP …ltered h i moment n k correlation with GDP f -0.20 0.80 correlation with f -0.03 0.52 n correlation with f -0.17 0.76 k Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work c. Co-Movement (dynamic) – HP …ltered h n , y t � i moment -4 -1 0 1 4 correlation with GDP f -0.12 -0.26 -0.20 -0.15 0.00 correlation with f 0.01 -0.06 -0.03 -0.06 0.00 n correlation with f -0.13 -0.24 -0.17 -0.13 0.02 k i k , y t � i moment -4 -1 0 1 4 correlation with GDP f 0.46 0.83 0.80 0.66 0.05 correlation with f 0.61 0.62 0.52 0.34 -0.27 n correlation with f 0.58 0.84 0.75 0.57 -0.11 k Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Need to explain series which are: Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Need to explain series which are: volatile 1 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Need to explain series which are: volatile 1 persistent 2 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Need to explain series which are: volatile 1 persistent 2 have a negative correlation 3 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Need to explain series which are: volatile 1 persistent 2 have a negative correlation 3 one is pro-cyclical; the other counter- or a-cyclical 4 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The Model PE model (Tobin’s Q) for both K and N y t = f ( z t , n t , k t ) , (1) Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The Model PE model (Tobin’s Q) for both K and N y t = f ( z t , n t , k t ) , (1) k t + 1 = ( 1 � δ t ) k t + i t , 0 � δ t � 1 . (2) n t + 1 = ( 1 � ψ t ) n t + h t , 0 � ψ t � 1 . (3) Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work π t = [ f ( z t , n t , k t ) � g ( i t , k t , q t v t , n t )] � w t n t . (4) p I cf t = ( 1 � τ t ) π t � ( 1 � χ t � τ t D t ) e t i t (5) Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work π t = [ f ( z t , n t , k t ) � g ( i t , k t , q t v t , n t )] � w t n t . (4) p I cf t = ( 1 � τ t ) π t � ( 1 � χ t � τ t D t ) e t i t (5) 1 β t + j = 1 + r t + j � 1 , t + j Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work π t = [ f ( z t , n t , k t ) � g ( i t , k t , q t v t , n t )] � w t n t . (4) p I cf t = ( 1 � τ t ) π t � ( 1 � χ t � τ t D t ) e t i t (5) 1 β t + j = 1 + r t + j � 1 , t + j ( j ! ) ∞ ∑ ∏ f i t + j , h t + j g E t max β t + i cf t + j (6) j = 0 i = 0 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work π t = [ f ( z t , n t , k t ) � g ( i t , k t , q t v t , n t )] � w t n t . (4) p I cf t = ( 1 � τ t ) π t � ( 1 � χ t � τ t D t ) e t i t (5) 1 β t + j = 1 + r t + j � 1 , t + j ( j ! ) ∞ ∑ ∏ f i t + j , h t + j g E t max β t + i cf t + j (6) j = 0 i = 0 The …rm takes the variables w , p I , δ , ψ , and β as given. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work F.O.C, asset-pricing approach 8 9 β t + 1 ( 1 � τ t + 1 ) � � < = � � g i t + p I ( 1 � τ t ) = E t f k t + 1 � g k t + 1 (7) t : ; +( 1 � δ t + 1 )( g i t + 1 + p I t + 1 ) 8 9 β t + 1 ( 1 � τ t + 1 ) < = � f n t + 1 � g n t + 1 � w t + 1 � ( 1 � τ t ) g h t = E t ; . (8) : +( 1 � ψ t + 1 ) g h t + 1 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Present values ( � � � � ) ∏ j ∏ j ∑ ∞ i = 0 β t + 1 + i i = 0 ( 1 � δ t + 1 + i ) Q K j = 0 t = E t . � � ( 1 � τ t + 1 + j ) f k t + 1 + j � g k t + 1 + j (9) Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Present values ( � � � � ) ∏ j ∏ j ∑ ∞ i = 0 β t + 1 + i i = 0 ( 1 � δ t + 1 + i ) Q K j = 0 t = E t . � � ( 1 � τ t + 1 + j ) f k t + 1 + j � g k t + 1 + j (9) ( � � � �� ) � ∏ j ∏ j ∑ ∞ i = 0 β t + 1 + i 1 � ψ t + 1 + i Q N j = 0 i = 0 t = E t . � � ( 1 � τ t + 1 + j ) f n t + 1 + j � g n t + 1 + j � w t + 1 + j (10) Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Estimation f ( z t , n t , k t ) = e z t n t α k 1 � α , 0 < α < 1 . (11) t 2 3 f 1 i t k t + f 2 h t n t + f 3 i t h t k t n t 6 7 + e 1 η 1 ( i t k t ) η 1 6 7 6 7 g ( � ) = f ( z z , n t , k t ) . (12) + e 2 η 2 ( h t n t ) η 2 6 7 4 5 � � η 3 + e 3 i t h t η 3 k t n t Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Properties of g function: CRS in i , k , h , n 1 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Properties of g function: CRS in i , k , h , n 1 Generalized convex ( η 1 , η 2 , η 3 are estimated) 2 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Properties of g function: CRS in i , k , h , n 1 Generalized convex ( η 1 , η 2 , η 3 are estimated) 2 � � � � η 3 i t h t , e 3 i t h t Allows for interaction f 3 3 k t n t η 3 k t n t Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Properties of g function: CRS in i , k , h , n 1 Generalized convex ( η 1 , η 2 , η 3 are estimated) 2 � � � � η 3 i t h t , e 3 i t h t Allows for interaction f 3 3 k t n t η 3 k t n t i 2 Special cases: f 2 h t f t n t , e 1 f t 4 2 k t k Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The data are quarterly, pertain to the private sector of the U.S. economy, and cover the period 1976-2008. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The data are quarterly, pertain to the private sector of the U.S. economy, and cover the period 1976-2008. They include f , k , n , i , h , β , w , δ , ψ , p I , τ Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work These data have the following features: (i) They pertain to the U.S. private sector, thus not confounding the analysis with government hiring and investment. (ii) Both hiring h and investment i refer to gross ‡ows. Likewise, separation of workers ψ and depreciation for capital δ are gross measures. (iii) The estimating equations take into account taxes and rules regarding depreciation. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work These data have the following features: (i) They pertain to the U.S. private sector, thus not confounding the analysis with government hiring and investment. (ii) Both hiring h and investment i refer to gross ‡ows. Likewise, separation of workers ψ and depreciation for capital δ are gross measures. (iii) The estimating equations take into account taxes and rules regarding depreciation. Points (ii) and (iii) require a substantial amount of computation, which is explained in the appendix. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Estimation issues: Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Estimation issues: Key object is cost function g 1 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Estimation issues: Key object is cost function g 1 Degree of convexity (…xed or free powers) 2 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Estimation issues: Key object is cost function g 1 Degree of convexity (…xed or free powers) 2 Interaction between costs 3 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Table 5, panel a, …xed powers Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Table 5, panel a, …xed powers Columns 1-3 of the table consider three alternative specifcations of the powers in the adjustment cost function Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Table 5, panel a, …xed powers Columns 1-3 of the table consider three alternative specifcations of the powers in the adjustment cost function Includes the quadratic ( η 1 = η 2 = 2) with a linear interaction ( η 3 = 1). Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Table 5, panel a, …xed powers Columns 1-3 of the table consider three alternative specifcations of the powers in the adjustment cost function Includes the quadratic ( η 1 = η 2 = 2) with a linear interaction ( η 3 = 1). To facilitate comparison with the literature: Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Table 5, panel a, …xed powers Columns 1-3 of the table consider three alternative specifcations of the powers in the adjustment cost function Includes the quadratic ( η 1 = η 2 = 2) with a linear interaction ( η 3 = 1). To facilitate comparison with the literature: Column 4 takes the standard case of the investment literature whereby there are only quadratic costs for adjusting capital ( f 2 = e 2 = e 3 = 0 ; η 1 = 2); Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Table 5, panel a, …xed powers Columns 1-3 of the table consider three alternative specifcations of the powers in the adjustment cost function Includes the quadratic ( η 1 = η 2 = 2) with a linear interaction ( η 3 = 1). To facilitate comparison with the literature: Column 4 takes the standard case of the investment literature whereby there are only quadratic costs for adjusting capital ( f 2 = e 2 = e 3 = 0 ; η 1 = 2); Column 5 does the same for hiring ( f 1 = e 1 = e 3 = 0 ; η 2 = 2); Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Table 5, panel a, …xed powers Columns 1-3 of the table consider three alternative specifcations of the powers in the adjustment cost function Includes the quadratic ( η 1 = η 2 = 2) with a linear interaction ( η 3 = 1). To facilitate comparison with the literature: Column 4 takes the standard case of the investment literature whereby there are only quadratic costs for adjusting capital ( f 2 = e 2 = e 3 = 0 ; η 1 = 2); Column 5 does the same for hiring ( f 1 = e 1 = e 3 = 0 ; η 2 = 2); Column 6 allows both but no interaction term ( η 1 = η 2 = 2 ; e 3 = 0). Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work In panel a, there are problems with all speci…cations. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work In panel a, there are problems with all speci…cations. Column (1), the quadratic with a linear interaction term yields a reasonable g function but the implied Q N series is inconsistent with the model’s formulations. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work In panel a, there are problems with all speci…cations. Column (1), the quadratic with a linear interaction term yields a reasonable g function but the implied Q N series is inconsistent with the model’s formulations. Columns 2 and 3 imply negative marginal costs of hiring. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Columns (4)–(6), which present prevalent cases in the literature, fare badly. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Columns (4)–(6), which present prevalent cases in the literature, fare badly. Column (4) has a huge standard error for the estimate of e 1 and the emerging adjustment cost function does not satisfy convexity (as g ii < 0) Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Columns (4)–(6), which present prevalent cases in the literature, fare badly. Column (4) has a huge standard error for the estimate of e 1 and the emerging adjustment cost function does not satisfy convexity (as g ii < 0) Column (5) has a very high standard error for f 2 (though the resulting adjustment cost function is reasonable). Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Columns (4)–(6), which present prevalent cases in the literature, fare badly. Column (4) has a huge standard error for the estimate of e 1 and the emerging adjustment cost function does not satisfy convexity (as g ii < 0) Column (5) has a very high standard error for f 2 (though the resulting adjustment cost function is reasonable). Column (6), without an interaction term ( e 3 = 0), yields negative total adjustment costs in part of the sample and negative marginal investment costs throughout the sample. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Table 5, panel b, free powers (with or without restrictions). Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Table 5, panel b, free powers (with or without restrictions). Shows that the powers are estimated around 4 for η 1 , 3 . 5 for η 2 and 2 for η 3 . Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Table 5, panel b, free powers (with or without restrictions). Shows that the powers are estimated around 4 for η 1 , 3 . 5 for η 2 and 2 for η 3 . The standard errors of these estimates are low. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Table 5, panel b, free powers (with or without restrictions). Shows that the powers are estimated around 4 for η 1 , 3 . 5 for η 2 and 2 for η 3 . The standard errors of these estimates are low. When α is freely estimated – 0 . 68 with a low standard error. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The scale estimates – i.e. estimates of e 1 , e 2 , e 3 , f 1 , f 2 , f 3 – usually have high standard errors Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The scale estimates – i.e. estimates of e 1 , e 2 , e 3 , f 1 , f 2 , f 3 – usually have high standard errors Throughout the panel, p-values of the J-statistics are higher than those of panel a. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The scale estimates – i.e. estimates of e 1 , e 2 , e 3 , f 1 , f 2 , f 3 – usually have high standard errors Throughout the panel, p-values of the J-statistics are higher than those of panel a. The g function implied by the estimates is reasonable across all speci…cations and satis…es convexity requirements. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation Stylized Facts The Model Estimation The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The scale estimates – i.e. estimates of e 1 , e 2 , e 3 , f 1 , f 2 , f 3 – usually have high standard errors Throughout the panel, p-values of the J-statistics are higher than those of panel a. The g function implied by the estimates is reasonable across all speci…cations and satis…es convexity requirements. In what follows, I use column column (8) of Table 5b as the benchmark speci…cation. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The Joint Behavior of Hiring and Investment Implications of the estimates: Value of adjustment costs 1 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The Joint Behavior of Hiring and Investment Implications of the estimates: Value of adjustment costs 1 Present value decomposition 2 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The Joint Behavior of Hiring and Investment Implications of the estimates: Value of adjustment costs 1 Present value decomposition 2 Co-movement analysis 3 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The Joint Behavior of Hiring and Investment Implications of the estimates: Value of adjustment costs 1 Present value decomposition 2 Co-movement analysis 3 Business cycle analysis 4 Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Total costs as a fraction of GDP (i.e. g f ) are 3 % of output Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Marginal costs of hiring (i.e. g h ) in terms of average output per worker ( f n ) – 0.21. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Marginal costs of hiring (i.e. g h ) in terms of average output per worker ( f n ) – 0.21. Roughly equivalent to 32 % of quarterly wages. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Marginal costs of hiring (i.e. g h ) in terms of average output per worker ( f n ) – 0.21. Roughly equivalent to 32 % of quarterly wages. In other words, …rms pay on the margin the equivalent of about 4 weeks of wages to hire the worker. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work There is little empirical evidence on the quantitative importance of such adjustment costs. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work There is little empirical evidence on the quantitative importance of such adjustment costs. Mortensen and Nagypal (2006, page 30): “Although there is a consensus that hiring costs are important, there is no authoritative estimate of their magnitude. Still, it is reasonable to assume that in order to recoup hiring costs, the …rm needs to employ a worker for at least two to three quarters. When wages are equal to their median level in the standard model (w = 0.983), hiring costs of this magnitude correspond to less than a week of wages.” Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The widely-cited Shimer (AER 2005) paper calibrates these costs at 0.213 in terms smilar to g h here, using a linear cost function. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The widely-cited Shimer (AER 2005) paper calibrates these costs at 0.213 in terms smilar to g h here, using a linear cost function. Hagedorn and Manovskii (AER 2008) – 0 . 057 to 0 . 067 in current terms (or around 1.1 to 1.3 weeks of wages). Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The widely-cited Shimer (AER 2005) paper calibrates these costs at 0.213 in terms smilar to g h here, using a linear cost function. Hagedorn and Manovskii (AER 2008) – 0 . 057 to 0 . 067 in current terms (or around 1.1 to 1.3 weeks of wages). Thus the results here are exactly in line with Shimer (2005) and higher than suggested by Mortensen and Nagypal (2006) or Hagedorn and Manovskii (2008). Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The widely-cited Shimer (AER 2005) paper calibrates these costs at 0.213 in terms smilar to g h here, using a linear cost function. Hagedorn and Manovskii (AER 2008) – 0 . 057 to 0 . 067 in current terms (or around 1.1 to 1.3 weeks of wages). Thus the results here are exactly in line with Shimer (2005) and higher than suggested by Mortensen and Nagypal (2006) or Hagedorn and Manovskii (2008). Older, micro evidence suggests a wide range of estimates, but generally higher costs. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The marginal costs of investment (i.e. g i ) in terms of average output per unit of capital ( f k ) – 1 . 66. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The marginal costs of investment (i.e. g i ) in terms of average output per unit of capital ( f k ) – 1 . 66. The most natural place to look for comparisons is the Q-literature. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The marginal costs of investment (i.e. g i ) in terms of average output per unit of capital ( f k ) – 1 . 66. The most natural place to look for comparisons is the Q-literature. The equation links the investment-to-capital ratio to a measure of Tobin’s Q. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work The marginal costs of investment (i.e. g i ) in terms of average output per unit of capital ( f k ) – 1 . 66. The most natural place to look for comparisons is the Q-literature. The equation links the investment-to-capital ratio to a measure of Tobin’s Q. These studies di¤er from each other and from the current study on many dimensions: the data sample used, the functional form assumed for marginal adjustment costs, additional variables included in the cost function, treatment of tax issues, and reduced form vs. structural estimation. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Nine key studies: (i) High adjustment costs. Marginal costs range between 3 to 60 in terms of average output per unit of capital. The implied total costs range between 15 % to 100 % of output. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Nine key studies: (i) High adjustment costs. Marginal costs range between 3 to 60 in terms of average output per unit of capital. The implied total costs range between 15 % to 100 % of output. (ii) Moderate adjustment costs . Marginal costs are around 1 in terms of average output per unit of capital. Total costs range between 0 . 5 % to 6 % of output. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work Nine key studies: (i) High adjustment costs. Marginal costs range between 3 to 60 in terms of average output per unit of capital. The implied total costs range between 15 % to 100 % of output. (ii) Moderate adjustment costs . Marginal costs are around 1 in terms of average output per unit of capital. Total costs range between 0 . 5 % to 6 % of output. (iii) Low adjustment costs . Marginal costs are 0 . 04 to 0 . 5 of average output per unit of capital. Total costs range between 0 . 1 % to 0 . 2 % of output. Eran Yashiv On The Joint Behavior of Hiring and Investment
Motivation and Background Structure of the Presentation The Value of Adjustment Costs Stylized Facts Decomposition of the Present Values of Investment and Hiring The Model Co-Movement of Hiring and Investment Estimation Hiring and Investment Over the Business Cycle The Joint Behavior of Hiring and Investment Conclusions and Plan of Future Work (i) The speci…cation that I run that is closest to the one used in most studies of Table 6 is the one reported in column (4) of Table 5. Eran Yashiv On The Joint Behavior of Hiring and Investment
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