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Match efficiency and firms' hiring standards

  • Sedláček, Petr

During the last recession, new hires were lower than what would be predicted by a standard matching function and the observed ratio of searching workers and firms. This paper first estimates U.S. match efficiency as an exogenous residual in the matching function using a simple search and matching model. It finds match efficiency to be pro-cyclical and to account for about 1/4 of unemployment increases during the most severe recessions. Second, this paper proposes a model with endogenous separations and firing costs that endogenizes match efficiency, which is driven by firms’ hiring standards. The model can explain almost 1/2 of the variation in the initial estimate of match efficiency.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 62 (2014)
Issue (Month): C ()
Pages: 123-133

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Handle: RePEc:eee:moneco:v:62:y:2014:i:c:p:123-133
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