THE WELFARE CONSEQUENCES OF A QUANTITATIVE SEARCH AND MATCHING APPROACH TO THE LABOR MARKET

2018 ◽  
Vol 70 (4) ◽  
pp. 423-442 ◽  
Author(s):  
Masanori Kashiwagi
Keyword(s):  
Labor Market ◽  
Search And Matching ◽  
Welfare Consequences

scholarly journals Employment targeting in a frictional labor market

2019 ◽  
Vol 12 (2) ◽  
pp. 242-262 ◽  
Author(s):  
Chetan Ghate ◽  
Debojyoti Mazumder
Keyword(s):  
Labor Market ◽  
Public Sector ◽  
Private Sector ◽  
Informal Sector ◽  
Developing Economies ◽  
Job Creation ◽  
Friction Model ◽  
Search And Matching ◽  
Content Type ◽  
The Public

Purpose Governments in both developing and developed economies play an active role in labor markets in the form of providing both formal public sector jobs and employment through public workfare programs. The authors refer to this as employment targeting. The purpose of the paper is to consider different labor market effects of employment targeting in a stylized model of a developing economy. In the context of a simple search and matching friction model, the authors show that the propensity for the public sector to target more employment can increase the unemployment rate in the economy and lead to an increase in the size of the informal sector. Design/methodology/approach The model is an application of a search and matching model of labor market frictions, where agents have heterogeneous abilities. The authors introduce a public sector alongside the private sector in the economy. Wage in the private sector is determined through Nash bargaining, whereas the public sector wage is exogenously fixed. In this setup, the public sector hiring rate influences private sector job creation and hence the overall employment rate of the economy. As an extension, the authors model the informal sector coupled with the other two sectors. This resembles developing economies. Then, the authors check the overall labor market effects of employment targeting through public sector intervention. Findings In the context of a simple search and matching friction model with heterogeneous agents, the authors show that the propensity for the public sector to target more employment can increase the unemployment rate in the economy and lead to an increase in the size of the informal sector. Employment targeting can, therefore, have perverse effects on labor market outcomes. The authors also find that it is possible that the private sector wage falls as a result of an increase in the public sector hiring rate, which leads to more job creation in the private sector. Originality/value What is less understood in the literature is the impact of employment targeting on the size of the informal sector in developing economies. The authors fill this gap and show that public sector intervention can have perverse effects on overall job creation and the size of the informal sector. Moreover, a decrease in the private sector wage due to a rise in public sector hiring reverses the consensus findings in the search and matching literature which show that an increase in public sector employment disincentivizes private sector vacancy postings.

scholarly journals A NOTE ON THE RELATION BETWEEN SEARCH COSTS AND SEARCH DURATION FOR NEW HIRES

2020 ◽  
pp. 1-14 ◽  
Author(s):  
Francesco Carbonero ◽  
Hermann Gartner
Keyword(s):  
Labor Market ◽  
Instrumental Variable ◽  
Search Costs ◽  
Market Volatility ◽  
Fixed Costs ◽  
Search And Matching ◽  
Matching Model ◽  
Instrumental Variable Estimation ◽  
Search And Matching Model ◽  
New Hires

Fixed search costs, that is, costs that do not vary with search duration, can amplify the cyclical volatility of the labor market. To assess the size of fixed costs, we analyze the relation between search costs and search duration using German establishment data. An instrumental variable estimation shows no relation between search duration and search costs. We conclude that search costs are mainly fixed costs. Furthermore, we show that a search and matching model, calibrated for Germany with fixed costs close to 75%, can generate labor market volatility that is consistent with the data.

scholarly journals FIRMS’ EMPLOYMENT DYNAMICS AND THE STATE OF THE LABOR MARKET

2021 ◽  
pp. 1-37
Author(s):  
Karolina Stadin
Keyword(s):  
Labor Market ◽  
Imperfect Competition ◽  
Adjustment Costs ◽  
Product Market ◽  
Realistic Model ◽  
Matching Theory ◽  
Perfect Competition ◽  
Search And Matching ◽  
Employment Decisions ◽  
Employment Dynamics

According to search and matching theory, a greater availability of unemployed workers should make it easier for a firm to fill a vacancy, but more vacancies at other firms should make recruitment more difficult. Simulating a theoretical model of a firm facing perfect competition in the product market and no convex adjustment costs (standard assumptions in the search and matching literature), I find that shocks to vacancies and unemployment lead to economically significant employment responses. Simulating a more realistic model with imperfect competition in the product market and convex adjustment costs, I find small employment effects of shocks to vacancies and unemployment. In particular, shocks to the number of unemployed seem to be unimportant. Estimating an employment equation on a panel of Swedish firms, I find that neither the number of unemployed workers nor the number of vacancies in the local labor market is important for firms’ employment decisions.

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