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A Test between Unemployment Theories Using Matching Data

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  • Coles, Melvyn

    () (University of Essex)

  • Petrongolo, Barbara

    () (London School of Economics)

Abstract

This paper tests whether aggregate matching is consistent with unemployment being mainly due to search frictions or due to job queues. Using U.K. data and correcting for temporal aggregation bias, estimates of the random matching function are consistent with previous work in this field, but random matching is formally rejected by the data. The data instead support "stock-flow" matching. Estimates find that around 50% of newly unemployed workers match quickly - they are interpreted as being on the short-side of their skill markets. The remaining workers match slowly, their re-employment rates depending statistically on the inflow of new vacancies and not on the vacancy stock. Having failed to match with existing vacancies, these workers wait for the arrival of new job vacancies. The results have important policy implications, particularly with reference to the design of optimal unemployment insurance programs.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 723.

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Length: 30 pages
Date of creation: Feb 2003
Date of revision:
Publication status: published in: International Economic Review, 2008, 49 (4), 1113-1141
Handle: RePEc:iza:izadps:dp723

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Keywords: temporal aggregation; unemployment; matching;

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References

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Citations

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Cited by:
  1. van Ommeren, Jos & Russo, Giovanni, 2009. "Firm Recruitment Behaviour: Sequential or Non-Sequential Search?," IZA Discussion Papers 4008, Institute for the Study of Labor (IZA).
  2. Aki Kangasharju & Jaakko Pehkonen & Sari Pekkala, 2005. "Returns to scale in a matching model: evidence from disaggregated panel data," Applied Economics, Taylor and Francis Journals, vol. 37(1), pages 115-118.
  3. M Andrews & S Bradley & D Stott & R Upward, 2003. "Testing Theories of Labour Market Matching," The School of Economics Discussion Paper Series 0318, Economics, The University of Manchester.
  4. Jolivet, Gregory & Postel-Vinay, Fabien & Robin, Jean-Marc, 2006. "The empirical content of the job search model: Labor mobility and wage distributions in Europe and the US," European Economic Review, Elsevier, vol. 50(4), pages 877-907, May.
  5. Jos van Ommeren & Giovanni Russo, 2004. "Sequential or Non-sequential Recruitment?," Tinbergen Institute Discussion Papers 04-109/3, Tinbergen Institute, revised 15 Sep 2008.
  6. Joanna Tyrowicz & Tomasz Jeruzalski, 2013. "(In)Efficiency of matching: the case of a post-transition economy," Economic Change and Restructuring, Springer, vol. 46(2), pages 255-275, May.
  7. Borowczyk Martins, Daniel & Jolivet, Grégory & Postel-Vinay, Fabien, 2011. "Accounting For Endogenous Search Behavior in Matching Function Estimation," IZA Discussion Papers 5807, Institute for the Study of Labor (IZA).
  8. René Fahr & Uwe Sunde, 2009. "Did the Hartz Reforms Speed-Up the Matching Process? A Macro-Evaluation Using Empirical Matching Functions," German Economic Review, Verein für Socialpolitik, vol. 10, pages 284-316, 08.
  9. M Andrews & S Bradley & D Stott & R Upward, 2003. "Why do Job-Seeker and Vacancy Hazards Slope Downwards? Estimating a Two-Sided Search Model of the Labour Market," The School of Economics Discussion Paper Series 0320, Economics, The University of Manchester.
  10. Robert Shimer, 2005. "Mismatch," NBER Working Papers 11888, National Bureau of Economic Research, Inc.
  11. Yashiv, Eran, 2007. "Labor search and matching in macroeconomics," European Economic Review, Elsevier, vol. 51(8), pages 1859-1895, November.
  12. Stephen R.G. Jones & W. Craig Riddell, 2002. "Unemployment and Non-Employment: Heterogeneities in Labour Market States," Department of Economics Working Papers 2002-05, McMaster University.
  13. Sunde, Uwe, 2002. "Unobserved Bilateral Search on the Labor Market: A Theory-Based Correction for a Common Flaw in Empirical Matching Studies," IZA Discussion Papers 520, Institute for the Study of Labor (IZA).
  14. Jekaterina Dmitrijeva, 2008. "Matching and Labour Market Efficiency across Space and through EU accession: Evidence from Latvia, Estonia and Slovenia," Documents de recherche 08-05, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.

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