Labour demand and job-to-job movement

The relationship between labour demand and job-to-job movement is investigated, both theoretically and empirically, at the macro level. It concentrates on the role of the employment regime (hiring, do-nothing or firing) and the hiring and firing costs. The exact upper bounds of the marginal hiring costs of an employed worker are derived, for which job mobility between two firms yields a positive aggregate relationship between job-to-job movement and employment. The relationship is estimated as a cointegration model for the Netherlands; it appears that the inclusion of the job-to-job mobility rate may provide a substantial improvement of the estimated labour-demand equation.