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Accounting For Endogeneity in Matching Function Estimation

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Author Info

  • Daniel Borowczyk-Martins

    (University of Bristol)

  • Gregory Jolivet

    (University of Bristol)

  • Fabien Postel-Vinay

    (University of Bristol)

Abstract

We show that equilibrium matching models imply that standard estimates of the matching function elasticities are exposed to an endogeneity bias, which arises from the search behavior of agents on either side of the market. We offer an estimation method which, under certain structural assumptions about the process driving shocks to matching efficiency, is immune from that bias. Application of our method to the estimation of a basic version of the matching function using aggregate U.S. data from the Job Openings and Labor Turnover Survey (JOLTS) suggests that the bias can be quantitatively important. (Copyright: Elsevier)

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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 16 (2013)
Issue (Month): 3 (July)
Pages: 440-451

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Handle: RePEc:red:issued:11-211

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Related research

Keywords: Matching function estimation; Unemployment; Vacancies; Job finding;

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References

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  1. Patricia M. Anderson & Simon M. Burgess, 2000. "Empirical Matching Functions: Estimation and Interpretation Using State-Level Data," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 93-102, February.
  2. Yashiv, Eran, 2007. "Labor search and matching in macroeconomics," European Economic Review, Elsevier, vol. 51(8), pages 1859-1895, November.
  3. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  4. Ayşegül Şahin & Joseph Song & Giorgio Topa & Giovanni L. Violante, 2012. "Mismatch Unemployment," NBER Working Papers 18265, National Bureau of Economic Research, Inc.
  5. Yashiv, E., 1999. "The Determinants of Equilibrium Unemployment," Papers 36-99, Tel Aviv.
  6. Gregory, Allan W. & Veall, Michael R., 1986. "Wald tests of common factor restrictions," Economics Letters, Elsevier, vol. 22(2-3), pages 203-208.
  7. Phillips, P C B & Durlauf, S N, 1986. "Multiple Time Series Regression with Integrated Processes," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 473-95, August.
  8. Stock, James H, 1987. "Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors," Econometrica, Econometric Society, vol. 55(5), pages 1035-56, September.
  9. Fahr, Rene & Sunde, Uwe, 2005. "Job and vacancy competition in empirical matching functions," Labour Economics, Elsevier, vol. 12(6), pages 773-780, December.
  10. Gregg, Paul & Petrongolo, Barbara, 2005. "Stock-flow matching and the performance of the labor market," European Economic Review, Elsevier, vol. 49(8), pages 1987-2011, November.
  11. Jolivet, Grégory, 2009. "A longitudinal analysis of search frictions and matching in the U.S. labor market," Labour Economics, Elsevier, vol. 16(2), pages 121-134, April.
  12. Yashiv, Eran, 2007. "Labor Search and Matching in Macroeconomics," IZA Discussion Papers 2743, Institute for the Study of Labor (IZA).
  13. Richard Rogerson & Robert Shimer, 2010. "Search in Macroeconomic Models of the Labor Market," NBER Working Papers 15901, National Bureau of Economic Research, Inc.
  14. Eran Yashiv, 2007. "Labor Search and Matching in Macroeconomics," CEP Discussion Papers dp0803, Centre for Economic Performance, LSE.
  15. Fahr, René & Sunde, Uwe, 2005. "Job and vacancy competition in empirical matching functions," Munich Reprints in Economics 20487, University of Munich, Department of Economics.
  16. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  17. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
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Cited by:
  1. Ippei Shibata, 2013. "Is Labor Market Mismatch a Big Deal in Japan?," IMF Working Papers 13/196, International Monetary Fund.
  2. Borowczyk-Martins, Daniel & Bradley, Jake & Tarasonis, Linas, 2014. "Racial Discrimination in the U.S. Labor Market: Employment and Wage Differentials by Skill," IZA Discussion Papers 8176, Institute for the Study of Labor (IZA).
  3. Régis Barnichon & Andrew Figura, 2010. "Labor market heterogeneity and the aggregate matching function," Economics Working Papers 1395, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2013.
  4. Ayşegül Şahin & Joseph Song & Giorgio Topa & Giovanni L. Violante, 2012. "Mismatch Unemployment," NBER Working Papers 18265, National Bureau of Economic Research, Inc.

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