Labour demand and job-to-job movement: Macro-consequences as a result from Micro-Economie behaviour

This paper investigates, both theoretically and empirically, the relationship between labour demand and job-to-job movement at the macro-level. A labour demand equation is modelied, which distinguishes the adjustment costs into net and gross adjustment costs. The paper derives and simulates the exact upper bounds of the marginal hiring costs of an empioyed worker, for which a quit between two firms yields a positive aggregate relationship between quits and employment. The relationship is estimated as a cointegration model for the Netherlands; it appears that the inclusion of quits may provide a substantial improvement of the estimated labour demand equation.