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Labor Market Heterogeneity and the Aggregate Matching Function

Author

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  • Regis Barnichon
  • Andrew Figura

Abstract

We estimate an aggregate matching function and find that the regression residual, which captures movements in matching efficiency, displays procyclical fluctuations and a dramatic decline after 2007. Using a matching function framework that explicitly takes into account worker heterogeneity as well as market segmentation, we show that matching efficiency movements can be the result of variations in the degree of heterogeneity in the labor market. Matching efficiency declines substantially when, as in the Great Recession, the average characteristics of the unemployed deteriorate substantially, or when dispersion in labor market conditions—the extent to which some labor markets fare worse than others—increases markedly. (JEL E24, E32, J41, J42)

Suggested Citation

  • Regis Barnichon & Andrew Figura, 2015. "Labor Market Heterogeneity and the Aggregate Matching Function," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 222-249, October.
  • Handle: RePEc:aea:aejmac:v:7:y:2015:i:4:p:222-49
    Note: DOI: 10.1257/mac.20140116
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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