Events

Prof. Cheng Chen
Assistant Professor of Economics
College of Business, Clemson University

Leveraging a Japanese plant-employee matched data, we document intriguing facts related
to worker dynamics within and across Firms. We find that the average age (i.e., experience)
of workers decreases with plant size. I.e., larger plants tend to hire younger workers (both
conditioning and un-conditioning on plant age). Paradoxically, we also document that
average tenure of workers with the current employer increases with plant size (both
conditioning and un-conditioning on plant age). We substantiate an empirical mechanism
that the age-tenure profile is much steeper for workers in larger plants, which implies that
unproductive plants hire workers gradually over their life-cycles while productive plants
hire disproportionately more young workers and keep those who have successfully
upgraded their human capital over their life-cycles. We then build up an industry
equilibrium model that can rationalize the above empirical findings and deliver different
hiring/firing strategies across plants. Finally, we simulate the model and find a strong
distributional impact of imposing a firing cost that is uniform across firm and workers. In
particular, the wages of young workers (especially those with low human capital) are
negatively affected by the firing cost, while some old workers can actually gain from the
firing cost.