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Accounting For Endogenous Search Behavior in Matching Function Estimation

  • Borowczyk-Martins, Daniel
  • Jolivet, Grégory
  • Postel-Vinay, Fabien

We show that equilibrium matching models imply that standard estimates of the matching function elasticities are exposed to an endogeneity bias, which arises from the search behavior of agents on either side of the market. We offer an estimation method which, under certain assumptions, is immune from that bias. Application of our method to the estimation of a basic version of the matching function using aggregate U.S. data from the Job Openings and Labor Turnover Survey (JOLTS) suggests that the bias is quantitatively important.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8471.

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Date of creation: Jul 2011
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Handle: RePEc:cpr:ceprdp:8471
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  1. Eran Yashiv, 2007. "Labor Search and Matching in Macroeconomics," CEP Discussion Papers dp0803, Centre for Economic Performance, LSE.
  2. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  3. Regis Barnichon & Andrew Figura, 2011. "What drives matching efficiency? a tale of composition and dispersion," Finance and Economics Discussion Series 2011-10, Board of Governors of the Federal Reserve System (U.S.).
  4. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
  5. Coles, Melvyn G & Petrongolo, Barbara, 2002. "A Test Between Unemployment Theories Using Matching Data," CEPR Discussion Papers 3241, C.E.P.R. Discussion Papers.
  6. Eran Yashiv, 2000. "The Determinants of Equilibrium Unemployment," American Economic Review, American Economic Association, vol. 90(5), pages 1297-1322, December.
  7. Patricia M. Anderson & Simon M. Burgess, 2000. "Empirical Matching Functions: Estimation and Interpretation Using State-Level Data," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 93-102, February.
  8. Berman, Eli, 1997. "Help Wanted, Job Needed: Estimates of a Matching Function from Employment Service Data," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages S251-92, January.
  9. Éva Nagypál, 2009. "What Can We Learn About Firm Recruitment from the Job Openings and Labor Turnover Survey?," NBER Chapters, in: Producer Dynamics: New Evidence from Micro Data, pages 109-123 National Bureau of Economic Research, Inc.
  10. Sunde, Uwe, 2007. "Empirical matching functions: Searchers, vacancies, and (un-)biased elasticities," Munich Reprints in Economics 19586, University of Munich, Department of Economics.
  11. Fahr, Rene & Sunde, Uwe, 2005. "Job and vacancy competition in empirical matching functions," Labour Economics, Elsevier, vol. 12(6), pages 773-780, December.
  12. Yashiv, Eran, 2007. "Labor search and matching in macroeconomics," European Economic Review, Elsevier, vol. 51(8), pages 1859-1895, November.
  13. Hsiao, Cheng, 1997. "Statistical Properties of the Two-Stage Least Squares Estimator under Cointegration," Review of Economic Studies, Wiley Blackwell, vol. 64(3), pages 385-98, July.
  14. Phillips, P C B & Durlauf, S N, 1986. "Multiple Time Series Regression with Integrated Processes," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 473-95, August.
  15. Gregg, Paul & Petrongolo, Barbara, 2005. "Stock-flow matching and the performance of the labor market," European Economic Review, Elsevier, vol. 49(8), pages 1987-2011, November.
  16. Timothy Dunne & J. Bradford Jensen & Mark J. Roberts, 2009. "Producer Dynamics: New Evidence from Micro Data," NBER Books, National Bureau of Economic Research, Inc, number dunn05-1, 07.
  17. Stock, James H, 1987. "Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors," Econometrica, Econometric Society, vol. 55(5), pages 1035-56, September.
  18. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  19. Yashiv, Eran, 2007. "Labor Search and Matching in Macroeconomics," IZA Discussion Papers 2743, Institute for the Study of Labor (IZA).
  20. 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.
  21. Gregory, Allan W. & Veall, Michael R., 1986. "Wald tests of common factor restrictions," Economics Letters, Elsevier, vol. 22(2-3), pages 203-208.
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