The slow job recovery in a macro model of search and recruiting intensity

Abstract

Abstract. An estimated model with labor search frictions and endogenous variations in search intensity and recruiting intensity does well in explaining the deep recession and weak recovery of the U.S. labor market during and after the Great Recession. The model features a sunk cost of vacancy creation, under which firms rely on adjusting both the number of vacancies and recruiting intensity to respond to aggregate shocks. This stands in contrast to the textbook model with free entry, which implies constant recruiting intensity. Our estimation suggests that fluctuations in search and recruiting intensity driven by productivity and discount factor shocks help substantially bridge the gap between the actual and model-predicted job filling and finding rates.

Search Frictions and Evolving Labour Market Dynamics

“…The evidence above suggests that the simple search frictions model does not provide an adequate description of the dynamic response of vacancies to shocks. Fujita and Ramey (2007), Leduc and Liu (2016) and Coles and Moghaddasi-Kelishomi (2018) develop an alternative model in which some matching opportunities persistent beyond the end of each period, so not all unfilled vacancies are immediately destroyed. This introduces dynamics for vacancies similar to that for unemployment.…”

Macro Recruiting Intensity from Micro Data

“…DFH exploited establishment-level JOLTS data to document a great deal of heterogeneity in recruiting intensity across firms and, in particular, a strong positive relationship between the vacancy yield (the success rate of a vacancy) and the hiring rate in the cross section. 2 Their work has spurred new interest on the topic, in terms of both measurement from microdata (see working papers by Mueller, Kettemann, and Zweimuller, 2018;Carrillo-Tudela, Kaas, and Gartner, 2018;Lochner, Merkl, Stuber, and Gurtzgen, 2019) and theoretical equilibrium modelling (Kaas and Kircher, 2015;Gavazza, Mongey, and Violante, 2018;Leduc and Liu, 2019). Our paper contributes to this line of research.…”

Search Frictions and Evolving Labour Market Dynamics

“…The evidence above suggests that the simple search frictions model does not provide an adequate description of the dynamic response of vacancies to shocks. Fujita and Ramey (2007), Leduc and Liu (2016) and Coles and Moghaddasi-Kelishomi (2018) develop an alternative model in which some matching opportunities persistent beyond the end of each period, so not all unfilled vacancies are immediately destroyed. This introduces dynamics for vacancies similar to that for unemployment.…”