@TechReport{iza:izadps:dp16837,
            	author={Bossler, Mario and Popp, Martin},
            	title={Labor Demand on a Tight Leash},
            	year={2024},
	month={Mar},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={16837},
            	url={https://www.iza.org/publications/dp16837},
	abstract={We develop a labor demand model that encompasses pre-match hiring cost arising from tight labor markets. Through the lens of the model, we study the effect of labor market tightness on firms' labor demand by applying novel shift-share instruments to the universe of German firms. In line with theory, we find that a doubling in tightness reduces firms' employment by 5 percent. Taking into account the resulting search externalities, the wage elasticity of firms' labor demand reduces from -0.7 to -0.5 through reallocation effects. In light of our results, pre-match hiring cost amount to 40 percent of annual wage payments.},
	keywords={labor demand;labor market tightness;wages;hiring cost;reallocation effects},
            }