Evaluating Search and Matching Models Using Experimental Data

Economics Letters, 2010

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Canadian Journal of Economics, 2009

We examine the effects of public policy parameters in a simple directed search model of the labour market, and contrast them with those in standard random matching models with Nash bargaining. Both finite and limit versions of the directed search model are considered, and the value of the limit model as an approximation of the finite one is assessed. As with the random matching model, job creation is the key channel through with the policy parameters effect the equilibrium of the directed search model. Both comparative static effects of the policy parameters and optimal configurations are identified.

Social Science Research Network, 2003

This paper makes three primary contributions. First, we demonstrate the usefulness of general equilibrium models as tools with which to draw policy implications for policies implemented in practice only as small-scale social experiments. Second, we illustrate the usefulness of social experiments as a tool to evaluate equilibrium models. In particular, we calibrate our model using only data on an experimental control group and from general data sets, and then use it to predict (in partial equilibrium) the outcomes experienced by an experimental treatment group. We find that it predicts these outcomes remarkably well. Third, we apply our methodology to the evaluation of the Canadian Self-Sufficiency Project (SSP), a policy providing generous financial incentives for Income Assistance (IA) recipients to obtain stable employment. This policy is similar to many other policies designed to "make work pay" currently under debate or in place in the US, the UK and elsewhere. Our results reveal several important feedback effects associated with the SSP policy; taken together, these feedback effects reverse the cost-benefit conclusions implied by the partial equilibrium experimental evaluation.

2007

We present a structural framework for the evaluation of public policies intended to increase job search intensity. Most of the literature defines search intensity as a scalar that influences the arrival rate of job offers; here we treat it as the number of job applications that workers send out. The wage distribution and job search intensities are simultaneously determined in market equilibrium. We structurally estimate the search cost distribution, the implied matching probabilities, the productivity of a match, and the flow value of nonlabor market time; the estimates are then used to derive the socially optimal distribution of job search intensities. From a social point of view, too few workers participate in the labor market while some unemployed search too much. The low participation rate reflects a standard hold-up problem and the excess number of applications result is due to rent seeking behavior. Sizable welfare gains (15% to 20%) can be realized by simultaneously opening more vacancies and increasing participation. A modest binding minimum wage or conditioning UI benefits on applying for at least one job per period, increases welfare.

European Economic Review, 2008

This paper explores the efficiency of the equilibrium allocation in a matching model with heterogeneous workers and jobs. In the basic setup the labor force is divided in two groups. The high-skill workers are qualified for all jobs, while low-skill workers can perform unskilled jobs but not the more attractive skilled jobs. We demonstrate that the equilibrium with random search and ex post bargaining is never efficient. Under Hosios' condition the average wage is correct, but bargaining compresses the wage distribution relative to workers' shadow values. The wage compression distorts the relative profits of jobs making it too attractive to create skilled jobs. Furthermore, the low skill premium may prevent that the two types of workers efficiently sort in different jobs. In the first case we show that the market offers too few job opportunities for low-skill workers. On the contrary, when mismatch is socially wasteful, we find that low-skill workers experience shorter unemployment spells than in the efficient allocation. Finally, we show that our results generalize to environments with many types of agents and less stringent restrictions on the production technology.

Ucl the Institute For Fiscal Studies London Uk, 2001

This paper exploits area based piloting and age-related eligibility rules to identify treatment effects of a labor market program-the New Deal for Young People in the UK. A central focus is on substitution/displacement effects and on equilibrium wage effects. The program includes extensive job assistance and wage subsidies to employers. We find that the program significantly raised transitions to employment by about five percentage points (about 20 percent over the pre-program base). The impact is robust to a wide variety of non-experimental estimators. However we present some evidence suggesting that this effect may not be as large in the longer run.

This paper estimates a model of two-sided search using micro-level data for a well-defined labour market. It examines the assumption of random matching and contrasts it with the stock-flow (or non-random) matching model of Coles and collaborators. Given a dataset of contacts, matches, and complete labour-market histories for both sides of the market, we estimate hazard functions for both (unemployed) job-seekers and vacancies. For job-seekers, the tests adds the stock of new vacancies to a standard job-seeker hazard which itself depends on the stocks of vacancies and unemployed. Our tentative results find very weak evidence of stock-flow matching.

Handbook of Labor Economics, 1999

JEL codes 1 Introduction 2 Modeling markets with friction 2.1 The stopping problem 2.2 Two-sided search and wage determination 2.3 Matching technology 2.4 Search equilibrium 3 Equilibrium u n e m p l o y m e n t 3.1 Exogenous job destruction 3.2 Job and worker flows 3.3 Social efficiency 4 Alternative models of w a g e determination 4.1 Competitive search equilibrium 4.2 Monopoly union 4.3 Strategic bilateral bargaining 4.4 Rent sharing with turnover costs 4.5 Insider wage 4.6 Efficiency wage 5 Labor market policy analysis 5.1 Modeling labor market policy 5.2 The qualitative effects of policy 5.3 The quantitative effects of policy 5.4 A call for research 6 W a g e posting games 6.1 The Diamond paradox 6.2 Wage dispersion: differential costs of search 6.3 Wage dispersion: more than one offer

2015

We exploit data from the 1986-87 Washington Alternative Work Search experiment (merged with nine years of follow-up administrative wage records) to estimate the causal effects of eliminating the unemployment insurance (UI) work search requirement (WSR) on duration of nonemployment, tenure with first post-claim employer, number of post-claim employers, long term earnings, employment, and hours worked. For UI claimants as a whole, we find that eliminating the WSR had little influence, either positive or negative, on long-term post-claim outcomes. In contrast, for permanent job losers, we find strong evidence that eliminating the WSR had a negative effect on employment outcomes, resulting in a longer time to reemployment, lower earnings, and a shorter duration of tenure with first post-claim employer. For claimants who were not permanent job losers, eliminating the WSR resulted in more UI benefit payments and longer unemployment durations, but made no difference for their employment outcomes. We conclude that, in addition to reducing moral hazard associated with UI, the WSR is an important policy for improving the long-term employment outcomes of permanent job losers.

1995