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A test between matching theories

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  • Melvyn Coles
  • Barbara Petrongolo

Abstract

This paper tests whether aggregate matching is consistent with random matching or stock-flow matching. Using U.K. matching data and correcting for temporal aggregation bias, estimates of the random matching function are consistent with previous work in this field. The data however support the "stock-flow" matching hypothesis. Estimates find that around 50% of newly unemployed workers match quickly. The remaining workers match slowly, their re-employment rates depending statistically on the inflow of new vacancies and not on the vacancy stock. The interpretation is that these latter workers, having failed to match with existing vacancies, wait for new, more suitable vacancies to come onto the market. The results have important policy implications, particularly for long term unemployment and the design of optimal unemployment insurance programs.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 175.

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Date of creation: May 2005
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Handle: RePEc:bge:wpaper:175

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Related research

Keywords: Stock-flow matching; Random matching; Job queues; Temporal aggregation;

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References

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  1. Taylor, Curtis R, 1995. "The Long Side of the Market and the Short End of the Stick: Bargaining Power and Price Formation in Buyers', Sellers', and Balanced Markets," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(3), pages 837-55, August.
  2. Coles, Melvyn G & Smith, Eric, 1998. "Marketplaces and Matching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 239-54, February.
  3. Eran Yashiv, 2000. "The Determinants of Equilibrium Unemployment," American Economic Review, American Economic Association, American Economic Association, vol. 90(5), pages 1297-1322, December.
  4. Cahuc, Pierre & Lehmann, Etienne, 1999. "Should unemployment benefits decrease with unemployment spell ?," CEPREMAP Working Papers (Couverture Orange) 9916, CEPREMAP.
  5. Katharine G. Abraham, 1987. "Help-Wanted Advertising, Job Vacancies, and Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1), pages 207-248.
  6. Gregg, Paul & Wadsworth, Jonathan, 1996. "How Effective Are State Employment Agencies? Jobcentre Use and Job Matching in Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 58(3), pages 443-67, August.
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