Abstract:I develop a directed search model of the labor market in which firms choose a recruiting intensity, determining the number of applicants they will interview. Interviewing applicants is costly but reveals their productivity, allowing the firm to hire better workers. I characterize the equilibrium and find that the uniqueness and cyclicality of recruiting intensity crucially depend on parameter values. Calibration of the model to the US labor market indicates a multiplicity of the equilibrium. An increase in agg… Show more
Using data from the Employment Opportunity Pilot Project, we examine the relationship between the starting wage paid to the worker filling a vacancy, the number of applications attracted by the vacancy, the number of candidates interviewed for the vacancy, and the duration of the vacancy. We find that the wage is positively related to the duration of a vacancy and negatively related to the number of applications and interviews per week. We show that these surprising findings are consistent with a view of the labor market in which firms post wages and workers direct their search based on these wages if workers and jobs are heterogeneous and the interaction between worker's type and job's type in production satisfies some rather natural assumptions.
Using data from the Employment Opportunity Pilot Project, we examine the relationship between the starting wage paid to the worker filling a vacancy, the number of applications attracted by the vacancy, the number of candidates interviewed for the vacancy, and the duration of the vacancy. We find that the wage is positively related to the duration of a vacancy and negatively related to the number of applications and interviews per week. We show that these surprising findings are consistent with a view of the labor market in which firms post wages and workers direct their search based on these wages if workers and jobs are heterogeneous and the interaction between worker's type and job's type in production satisfies some rather natural assumptions.
“…In this case, some of the offers made by buyers may end up being rejected. Following Galenianos and Kircher (), Kircher (), and Wolthoff (), we plan to pursue this issue in future research. We conjecture that in an environment where sellers can meet multiple buyers, it is no longer possible to separate sellers at the search or at the mechanism stage.…”
We study directed search equilibria in a decentralized market with adverse selection, where uninformed buyers post general trading mechanisms and informed sellers select one of them. We show that this has differing and significant implications with respect to the traditional approach, based on bilateral contracting between the parties. In equilibrium, all buyers post the same mechanism and low‐quality sellers receive priority in any meeting with a buyer. Also, buyers make strictly higher profits with low‐ than with high‐type sellers. When adverse selection is severe, the equilibrium features rationing and is constrained inefficient. Compared to the equilibrium with bilateral contracting, the equilibrium with general mechanisms yields a higher surplus for most, but not all, parameter specifications.
“…If this is the case, the congestion externalities are smaller and it is more desirable that workers send out multiple applications. In Kircher (2009), firms can contact all their applicants (full recall), while Wolthoff (2014) endogenizes this decision by introducing a cost for each contact. Gautier and Holzner (2014) also have full recall and show that allowing firms to change their wage offer after the network has been formed improves efficiency.…”
Section: Discussionmentioning
confidence: 99%
“…While various papers have analyzed models in which workers send multiple applications simultaneously, e.g. Albrecht et al (2006), Gautier and Wolthoff (2009), Galenianos and Kircher (2009), Kircher (2009), Wolthoff (2014, these papers all maintain the assumption that workers are homogeneous with respect to their search cost, making them unsuitable for studying distributions of search intensities. 2…”
Many labor market policies affect the marginal benefits and costs of job search. The impact and desirability of such policies depend on the distribution of search costs. In this paper, we provide an equilibrium framework for identifying the distribution of search costs and we apply it to the Dutch labor market. In our model, the wage distribution, job search intensities, and firm entry are simultaneously determined in market equilibrium. Given the distribution of search intensities (which we directly observe), we calibrate the search cost distribution and the flow value of non-market time; these values are then used to derive the socially optimal firm entry rates and distribution of job search intensities. From a social point of view, some unemployed workers search too little due to a hold-up problem, while other unemployed workers search too much due to coordination frictions and rentseeking behavior. Our results indicate that jointly increasing unemployment benefits and the sanctions for unemployed workers who do not search at all can be welfare-improving.
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