The State-Dependent Effectiveness of Hiring Subsidies

The responsiveness of job creation to shocks is procyclical, while the destruction countercyclical. This new finding can be explained by a heterogeneous-firm model in which hiring costs lead lumpy employment adjustment. predicts that policies aim stimulate encouraging creation, such as subsidies, are significantly less effective recessions: these times when few firms near their thresholds and many firing thresholds. Policies target margin, protection particularly at times. (JEL E24, E32, H25, J23, J64)