Applications and Interviews: A Structural Analysis of Two-Sided Simultaneous Search

Abstract

Most of the literature analyzing equilibrium effects of labor market policies assumes bilateral meetings between workers and firms. This ignores the frictions that arise when workers and firms meet in a multilateral way and cannot coordinate their application and hiring decisions. I analyze the magnitude of these frictions. For this purpose, I present an equilibrium search model of the labor market with an endogenous number of contacts between workers and firms. Firms post a wage and a recruitment technology that determines how many applicants they will interview. After observing these contracts, workers decide to which firms to apply. Sending more applications and interviewing more applicants are both costly activities but increase the probability to match. In equilibrium, contract dispersion arises endogenously and workers spread their applications over the different types of contracts. Estimation of the model on the Employment Opportunities Pilot Projects data set provides values for the cost of an application and the cost of an interview. These estimates are used to determine the output loss compared to a Walrasian world. Frictions on the worker and the firm side reduce output by approximately 1% each. There is a potential role for activating labor market policies, because I show that for the estimated parameter values welfare can be improved if unemployed workers increase their search intensity.

Informative Advertising in Directed Search

“…One of the advantages of using continuous variables to model search intensity is the ease by which the equilibrium can be analytically characterized. Further, discrete-choice models are less convenient for estimation purposes, so that a continuous measure for search intensities with differentiable cost function may be more appealing (such an application can be found in Wolthoff, 2011).…”

On the Game‐theoretic Foundations of Competitive Search Equilibrium*

“…The second sum is similar, but due to limited interview capacity, only of the i applicants can be evaluated. Such a process is examined in Wolthoff (2009). Spatial search and constant elasticity of substitution (CES) matching.…”

Secret Search

“…Historically, this literature has focused primarily on candidates looking for jobs, instead of firms searching for workers. Some studies in the directed search literature have analyzed recruitment (Julien et al., ; Albrecht et al., ; Galenianos and Kircher, ; Wolthoff, ; and Basov et al., ), but in these studies firms do not decide which search process to use. The mechanism design literature (in particular, McAfee, ; Peters and Severinov, ; Eeckhout and Kircher, ; Guerrieri et al., ; Auster and Gottardi, ; and Cai et al., ) considers choices of pricing processes, but does not allow firms to choose the processes considered in this article.…”

“…SECRET SEARCH 5 candidates looking for jobs, instead of firms searching for workers. Some studies in the directed search literature have analyzed recruitment (Julien et al, 2000;Albrecht et al, 2006;Galenianos and Kircher, 2009;Wolthoff, 2012;and Basov et al, 2014), but in these studies firms do not decide which search process to use. The mechanism design literature (in particular, McAfee, 1993;Peters and Severinov, 1997;Eeckhout and Kircher, 2010;Guerrieri et al, 2010;Auster and Gottardi, 2017;and Cai et al, 2017) considers choices of pricing processes, but does not allow firms to choose the processes considered in this article.In their survey of personnel economics, Oyer and Schaefer (2010) point out that there is significant heterogeneity in firm recruiting practices, and that this heterogeneity has been considerably underresearched.…”