Matching with Multiple Applications: The Limiting Case

1998

This thesis studies different aspects of job matching, mismatch, and their relationship with aggregate unemployment. The first part addresses the question of the structural rise in the unemployment rate in OECD countries by looking at the link between sectoral shocks and aggregate performance in an economy with heterogeneous labour. The type of sectoral shock considered in chapter 2 is the introduction of skill-biased technologies, that increase the relative demand for skilled labour at the expenses of the less-skilled. Unless the supply of skills adjusts accordingly to the increased demand, and/or relative wages are perfectly flexible, this shock has permanent effects on the aggregate unemployment rate, as shown in a non-competitive labour market model with skilled and unskilled workers. The calibration of this model predicts that a relevant proportion of the recent rise in British unemployment can be attributed to an unbalanced evolution in the demand and the supply of skills, while in continental Europe skill imbalances do not seem responsible for serious labour market problems. Finally, the impact of skill mismatch on US unemployment was limited in magnitude and almost completely offset by counter acting forces. The second part of the work uses a job-search approach to investigate the technical characteristics of the matching process between vacancies and unemployed job-seekers. Chapter 3 reviews the empirical search literature that has estimated hiring functions, concluding that recent work has successfully established the existence of a labour mar ket matching function, in which both vacancies and unemployed workers contribute significantly to job formation. Chapter 4 considers a plausible alternative to a random meeting technology between employers and job-seekers, based on the existence of cheap information channels that save all traders the effort of locating matching partners. When combined with a proper handling of timing in the matching technology, this set-up provides novel results on the recent performance of the British labour market. In particular, it seems that the claimed deterioration of the search effectiveness of the unemployed cannot be explained by a lack of search effort per se, but by stronger competition that the registered unemployed face by other labour market segments. Chapter 5 provides an analysis of the matching process at the micro level, using individual duration data obtained from a British sample of unemployment entrants. The determinants of re-employment probabilities are here related to a search model in which transitions into employment depend on the probability of receiving a job offer and that of accepting a job offer. The analysis shows that the hypothesis of constant returns to scale in the matching technology, embodied in most bilateral search models, is not rejected by the data. Individual re-employment probabilities respond in fact to local labour market tightness, and axe unaffected by its size.

SSRN Electronic Journal, 2001

This paper makes two contributions to the empirical matching literature. First, a recent study by Anderson and Burgess (2000) testing for endogenous competition among job seekers in a matching framework , is replicated with a richer and more accurate data set for Germany. Their results are confirmed and found to be surprisingly robust. Second, the matching framework is augmented by endogenous strategic hiring behavior on the side of vacancyposting firms. Neglecting job competition, the relevance of strategic hiring is shown using the same empirical strategy. At the same time, the test is shown to be invalid if both types of endogenous behavior are present JEL Codes: J41, J64

IZA Institute of Labor Economics Discussion Paper Series, 2002

This paper develops a model of equilibrium unemployment with (unobservable) endogenous on-the-job search and (partly unobservable) endogenous search behavior by firms. The model allows to analyze crowding-out of unemployed job seekers by endogenous on-the job search of employees, and the interaction of job search behavior and vacancy posting policies of firms. Moreover, it is shown that the neglect of endogenous but not observable behavior in the empirical literature on labor matching leads to systematically biased estimates of the matching elasticities, posing a caveat on the results of previous studies testing for constant returns of the matching function. The theoretical model presented allows to predict the direction of the bias. We propose a correction for the estimates of empirical matching functions that leads to unbiased estimates of the matching elasticities. The empirical implications of the theoretical model are tested and confirmed using German administrative data, and u...

2008

Ricerche Economiche, 1993

We study wage determination in the Jovanovic model of matching, relaxing the standard assumption that wages continuously adjust to reflect on-the-job performance and studying aggregation of ex-ante heterogeneous career paths. We assume that workers have no bargaining power and consider an equilibrium where individual workers' age-earnings profiles are piecewise constant, reflecting their outside earning opportunities at each point in time. Turnover results from employers' firing decisions rather than from workers' quitting decisions, and the equilibrium delivers realistic cross-sectional and time-series implications. Employees receive only a portion rather than the whole of the ex-ante producer's surplus from established matches, and have individual incentives to lobby for increased job security. Inefficiently low aggregate turnover may result if such lobbying efforts are successful.

Journal of Labor Economics, 1997

estimate a function that matches vacant jobs and unemployed workers to produce new hires. Israeli law requiring vacancy registration yields unique data quality. The literature underestimates matching function coefficients because of a simultaneity bias, as the outflow of hires depletes stocks of unemployed and vacancies. Instruments and a new simulation method address this bias. A new test reveals strong evidence of heterogeneity in unemployed and vacancies. Estimates imply labor market dynamics that absorb shocks completely within only 2 months. Reductions in the hire rate of referrals can explain a 2.1 percentage point increase in unemployment between 1978 and 1990.

2003

This Discussion Paper is issued within the framework of IZA's research area Mobility and Flexibility of Labor. Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions.

Labour Economics, 2009

Economic Journal, 2009

This Discussion Paper is issued within the framework of IZA's research area Mobility and Flexibility of Labor. Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions.

2003

The study presents evidence on the matching function by using different measures of job matches, the pool of potential job seekers and time aggregation. This allows us to test various hypotheses put forward in the matching literature. The properties of a matching function are examined by using a large panel dataset from Finland. The monthly data is highly disaggregated, comprising 173 workto-travel areas from a 12-year period between 1991 and 2002. The interpretation of the empirical analysis benefits from the register-based data that has detailed information on the types of open vacancies and unemployed job seekers. The results imply that the main economic activity of the job seekers affects matching performance of local labour offices significantly. Seekers not in labour force have a positive impact on matches while unemployed seekers display a negative effect. A greater share of employed job seekers does not lead to better matching performance. These findings can be explained by the characteristics of open vacancies and job seekers as well as the ranking behaviour of the employers. Furthermore, the time aggregation bias is likely to cause severe underestimation of the returns to scale in the matching function. Finally, regional characteristics do not explain under-or over-performance of matching.