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Returns to scale in a matching model: evidence from disaggregated panel data

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  • Aki Kangasharju
  • Jaakko Pehkonen
  • Sari Pekkala

Abstract

The returns to scale in the matching function play an important role in models with endogenous search effort. Due to positive externalities, increasing returns to scale in matching can support high or low activity equilibrium in the labour market. In this study, we examine this issue using panel data from Finnish employment offices. The study finds that the results from the Cobb-Douglas and translog specification are qualitatively different. The CD specification of the matching function exhibits constant returns to scale. The translog specification, in turn, exhibits increasing returns to scale. The elasticity estimate for returns, using the preferred specification and minimum and maximum sample values for job seekers and vacancies, fall in the range of 1.1 to 1.6.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 37 (2005)
Issue (Month): 1 ()
Pages: 115-118

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Handle: RePEc:taf:applec:v:37:y:2005:i:1:p:115-118

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References

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  1. Burdett, Kenneth & Coles, Melvyn G & van Ours, Jan C, 1994. "Temporal Aggregation Bias in Stock-Flow Models," CEPR Discussion Papers 967, C.E.P.R. Discussion Papers.
  2. Burda, Michael C & Wyplosz, Charles, 1993. "Gross Worker and Job Flows in Europe," CEPR Discussion Papers 868, C.E.P.R. Discussion Papers.
  3. Coles, Melvyn G & Petrongolo, Barbara, 2002. "A Test Between Unemployment Theories Using Matching Data," CEPR Discussion Papers 3241, C.E.P.R. Discussion Papers.
  4. Petrongolo, Barbara & Pissarides, Christopher, 2000. "Looking Into The Black Box: A Survey Of The Matching Function," CEPR Discussion Papers 2409, C.E.P.R. Discussion Papers.
  5. Daniel Munich & Jan Svejnar & Katherine Terrell, 1998. "Worker-Firm Matching and Unemployment in Transition to a Market Economy: (Why) Were the Czechs More Successful than Others?," William Davidson Institute Working Papers Series 107, William Davidson Institute at the University of Michigan.
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Cited by:
  1. Sanna-Mari Hynninen, 2005. "Labour market status of job seekers in regional matching processes," ERSA conference papers ersa05p499, European Regional Science Association.
  2. Sanna-Mari Hynninen & Aki Kangasharju & Jaakko Pehkonen, 2006. "Regional Matching Frictions and Aggregate Unemployment," ERSA conference papers ersa06p416, European Regional Science Association.
  3. Michael Stops & Thomas Mazzoni, 2010. "Matchingprozesse auf beruflichen Teilarbeitsmärkten Job Matching on Occupational Labour Markets," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 230(3), pages 287-312, June.
  4. Godfrey Keller & Kevin Roberts & Margaret Stevens, 2007. "Unemployment, Participation and Market Size," Economics Series Working Papers 362, University of Oxford, Department of Economics.
  5. Michael Stops, 2011. "Job Matching on non-separated Occupational Labour Markets," ERSA conference papers ersa11p372, European Regional Science Association.
  6. Sanna-Mari Ahtonen, 2004. "Matching across space: evidence from Finland," ERSA conference papers ersa04p205, European Regional Science Association.
  7. Razzak, Weshah, 2008. "On The dynamic of search, matching and productivity in New Zealand and Australia," MPRA Paper 8262, University Library of Munich, Germany.
  8. Stops, Michael, 2012. "Job matching across occupational labour markets," IAB Discussion Paper 201227, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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