Using a matched firm-worker dataset, we show both theoretically and empirically that positive assortative matching between firms and workers leads to an underestimation of the absolute value of wage elasticity of labor demand

This paper shows that liquidity constraints restrict job creation even when labor markets are flexible. In a dynamic model of labor demand, I show that in an environment of imperfect capital and imperfect labor markets, firms use temporary contracts to relax financial constraints. Evidence for...