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Mühlemann, Samuel; Leiser, Mirjam Strupler (2018): Hiring costs and labor market tightness. In: Labour Economics, Vol. 52: pp. 122-131
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We provide new empirical evidence on the magnitude and determinants of a firm's hiring costs when filling a vacancy for skilled workers. In Switzerland, the average hiring costs amount to about 16 weeks of wage payments. The main components of hiring costs are post-match hiring costs, resulting from the initial low productivity and formal training needed for a new hire (53%), and disruption costs, resulting from the informal instruction of a new hire (26%). Pre-match hiring costs (i.e., search costs) account for just 21% of a firm's hiring costs. Moreover, we find that search costs are positively associated with labor market tightness (i.e., the v/u ratio), both in the cross-section and over time. Our results will help to calibrate the hiring cost parameter in search models.