The Ins and Outs of Vacancies

This paper uses large-scale high-frequency data on vacancy flows and matched employer-employee data from Austria to document the cyclicality of vacancy flows and their contribution to variation in the vacancy stock.

We document four key facts: (1) Vacancy inflows explain at least one-third of the cyclical variation in the vacancy stock, whereas the remainder is explained by vacancy fillings; (2) vacancy lapses, while accounting for about 20% of vacancy outflows, are acyclical and do not contribute to variation in the stock; (3) replacement vacancies, i.e. vacancies posted following a quit of a worker to another firm, are a key driver of vacancy inflows over the business cycle; and (4) the composition of vacancy inflows varies little over the business cycle and cannot account for the cyclical variation in vacancy filling. We set up a search-and-matching model with fixed costs of vacancy posting and on-the-job search, and calibrate it to match the averages of vacancy flows.

The calibrated model highlights the crucial role of on-the-job search – particularly replacement hires – in explaining the observed importance of vacancy inflows for cyclical fluctuations in the vacancy rate.

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