Capital Values, Job Values, and the Joint Behavior of Hiring and Investment Eran Yashiv Discussion by David Weiss June 22, 2014

Mazel Tov!

Idea ◮ Hiring (investment) depend on value of a worker (capital). ◮ Volatile. Want to understand them. ◮ MB (PV) = MC. Not directly observable. ◮ Infer from an estimated structural model. ◮ Eran: Maybe MC of workers & capital move together?

Idea ◮ Hiring (investment) depend on value of a worker (capital). ◮ Volatile. Want to understand them. ◮ MB (PV) = MC. Not directly observable. ◮ Infer from an estimated structural model. ◮ Eran: Maybe MC of workers & capital move together?

Idea ◮ Hiring (investment) depend on value of a worker (capital). ◮ Volatile. Want to understand them. ◮ MB (PV) = MC. Not directly observable. ◮ Infer from an estimated structural model. ◮ Eran: Maybe MC of workers & capital move together?

What to do? ◮ Partial equilibrium RBC model. KISS Principle. ◮ Key: Use ’g’ function- interaction of investment and hiring in marginal costs. Shocks to demand (PV). ◮ Adjustment costs => rents. ◮ Data on GDP, capital, investment, hiring, prices of investment ◮ See what estimates give. Gets reasonable costs. Pro cyclical investment, countercyclical hiring. Best to coordinate hiring/investing. ◮ Compare with search literature/finance literature.

What to do? ◮ Partial equilibrium RBC model. KISS Principle. ◮ Key: Use ’g’ function- interaction of investment and hiring in marginal costs. Shocks to demand (PV). ◮ Adjustment costs => rents. ◮ Data on GDP, capital, investment, hiring, prices of investment ◮ See what estimates give. Gets reasonable costs. Pro cyclical investment, countercyclical hiring. Best to coordinate hiring/investing. ◮ Compare with search literature/finance literature.

What to do? ◮ Partial equilibrium RBC model. KISS Principle. ◮ Key: Use ’g’ function- interaction of investment and hiring in marginal costs. Shocks to demand (PV). ◮ Adjustment costs => rents. ◮ Data on GDP, capital, investment, hiring, prices of investment ◮ See what estimates give. Gets reasonable costs. Pro cyclical investment, countercyclical hiring. Best to coordinate hiring/investing. ◮ Compare with search literature/finance literature.

The ’g’ Function Agenda ◮ Yashiv and Merz (2007)- Helps understand firm market valuations. ◮ Yashiv and Faccini (2014 wp)-Important for understanding inflation. ◮ Yashiv (2014)- Important for understanding hiring/investment rates

The ’g’ Function Agenda ◮ Yashiv and Merz (2007)- Helps understand firm market valuations. ◮ Yashiv and Faccini (2014 wp)-Important for understanding inflation. ◮ Yashiv (2014)- Important for understanding hiring/investment rates

The ’g’ Function Agenda ◮ Yashiv and Merz (2007)- Helps understand firm market valuations. ◮ Yashiv and Faccini (2014 wp)-Important for understanding inflation. ◮ Yashiv (2014)- Important for understanding hiring/investment rates

Where to go from here? More micro model ◮ Firm entry/growth & the relationship between hiring & investment ◮ Take view that shock to demand (PV) => marginal costs change. Shocks to costs, not demand? Look at more stuff based on this notion ◮ Implications of taxes not well studied ◮ I bring this up because: V/N U/N Time Series ◮ Dramatic cut of corporate/dividend taxes in 1980s. Rise in borrowing. ◮ Argument that this led to great moderation. ◮ Maybe jobless recoveries? Erem Atesagaoglu

Where to go from here? More micro model ◮ Firm entry/growth & the relationship between hiring & investment ◮ Take view that shock to demand (PV) => marginal costs change. Shocks to costs, not demand? Look at more stuff based on this notion ◮ Implications of taxes not well studied ◮ I bring this up because: V/N U/N Time Series ◮ Dramatic cut of corporate/dividend taxes in 1980s. Rise in borrowing. ◮ Argument that this led to great moderation. ◮ Maybe jobless recoveries? Erem Atesagaoglu

Where to go from here? More micro model ◮ Firm entry/growth & the relationship between hiring & investment ◮ Take view that shock to demand (PV) => marginal costs change. Shocks to costs, not demand? Look at more stuff based on this notion ◮ Implications of taxes not well studied ◮ I bring this up because: V/N U/N Time Series ◮ Dramatic cut of corporate/dividend taxes in 1980s. Rise in borrowing. ◮ Argument that this led to great moderation. ◮ Maybe jobless recoveries? Erem Atesagaoglu

A Few Minor Comments ◮ Separation rates perhaps should be gross as well. Currently uses ψ = EN + EU . Why not ψ = EN + EU + EE ? E E ◮ Finds that Q n is countercyclical, as hiring rates countercyclical. ◮ We have data that perhaps can relate to this- Haefke et al (2010) finds that elasticity of wages wrt productivity > 1

A Few Minor Comments ◮ Separation rates perhaps should be gross as well. Currently uses ψ = EN + EU . Why not ψ = EN + EU + EE ? E E ◮ Finds that Q n is countercyclical, as hiring rates countercyclical. ◮ We have data that perhaps can relate to this- Haefke et al (2010) finds that elasticity of wages wrt productivity > 1

Cool! ◮ Nice paper. I learned a lot! Thanks for having me discuss. ◮ Some interesting avenues for future work.

Erem Atesagaoglu Figure: Back .

More Erem Atesagaoglu Figure: Back .

UV Rates Figure: Back .

Time Series Figure: Back .

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