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Temporal Aggregation Bias in Stock-Flow Models


  • Burdett, Kenneth
  • Coles, Melvyn G
  • van Ours, Jan C


The matching function describes the flow of job creation as a function of the stocks of unemployed and vacancies. Most empirical work tries to identify such a relationship by regressing the flow of matches (aggregated over the month) on the stocks of unemployment and vacancies measured at the beginning of that month. It is shown that estimates obtained using this procedure will be downward biased if unemployment and vacancies are mean-reverting processes. If the bias is small, the size of the bias is proportional to the length of the period interval. By further aggregating the data, say from monthly to quarterly data, the downward bias should triple. The resulting change in the parameter estimates can then be used to estimate the size of the original bias.

Suggested Citation

  • 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.
  • Handle: RePEc:cpr:ceprdp:967

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    References listed on IDEAS

    1. Eichengreen, Barry & Uzan, Marc, 1992. "The Marshall Plan: Economic Effects and Implications for Eastern Europe and the Former USSR," CEPR Discussion Papers 638, C.E.P.R. Discussion Papers.
    2. Fernandez, Raquel & Glazer, Jacob, 1991. "Striking for a Bargain between Two Completely Informed Agents," American Economic Review, American Economic Association, vol. 81(1), pages 240-252, March.
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    Cited by:

    1. Stefan Profit & Stefan Sperlich, 2004. "Non-uniformity of job-matching in a transition economy - A nonparametric analysis for the Czech Republic," Applied Economics, Taylor & Francis Journals, vol. 36(7), pages 695-714.
    2. Aki Kangasharju & Jaakko Pehkonen & Sari Pekkala, 2003. "Matching in thin labour markets: panel data evidence from Finland, 1991-2002," ERSA conference papers ersa03p208, European Regional Science Association.
    3. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    4. Burgess, Simon & Profit, Stefan, 2001. "Externalities in the matching of workers and firms in ritain," Labour Economics, Elsevier, vol. 8(3), pages 313-333, June.
    5. Aki Kangasharju & Jaakko Pehkonen & Sari Pekkala, 2005. "Returns to scale in a matching model: evidence from disaggregated panel data," Applied Economics, Taylor & Francis Journals, vol. 37(1), pages 115-118.
    6. Broersma, Lourens & Van Ours, Jan C., 1999. "Job searchers, job matches and the elasticity of matching," Labour Economics, Elsevier, vol. 6(1), pages 77-93, March.
    7. Hogan, Seamus & Ragan, Christopher, 1998. "Job security with equilibrium unemployment," Labour Economics, Elsevier, vol. 5(2), pages 185-185, June.
    8. Mercenier, Jean & Michel, Philippe, 2001. "Temporal aggregation in a multi-sector economy with endogenous growth," Journal of Economic Dynamics and Control, Elsevier, vol. 25(8), pages 1179-1191, August.
    9. Coles, Melvyn G & Petrongolo, Barbara, 2002. "A Test Between Unemployment Theories Using Matching Data," CEPR Discussion Papers 3241, C.E.P.R. Discussion Papers.
    10. Borowczyk-Martins, Daniel & Jolivet, Grégory & Postel-Vinay, Fabien, 2011. "Accounting For Endogenous Search Behavior in Matching Function Estimation," CEPR Discussion Papers 8471, C.E.P.R. Discussion Papers.
    11. Masaru Sasaki & Miki Kohara & Tomohiro Machikita, 2013. "Measuring Search Frictions Using Japanese Microdata," The Japanese Economic Review, Japanese Economic Association, vol. 64(4), pages 431-451, December.
    12. Coen N. Teulings & Pieter A. Gautier, 2004. "The Right Man for the Job," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 553-580.
    13. Butter, F.A.G. den, 1995. "Labour participation and labour market dynamics in an empirical flow model with heterogeneous unemployment," Serie Research Memoranda 0022, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    14. 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.
    15. Angela, Cipollone & Paolo E., Giordani, 2016. "When Entrepreneurs Meet Financiers: Evidence from the Business Angel Market," MPRA Paper 69545, University Library of Munich, Germany.
    16. Kangasharju, Aki & Hynninen Sanna-Mari, Pehkonen Jaakko, 2006. "Regional Matching Frictions and Aggregate Unemployment," Discussion Papers 383, VATT Institute for Economic Research.
    17. Profit, Stefan, 1997. "Twin peaks in regional unemployment and returns to scale in job-matching in the Czech Republic," SFB 373 Discussion Papers 1997,63, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    18. Pieter A. Gautier & Coen N. Teulings, 2000. "The Right Man for the Job: Increasing Returns in Search?," Econometric Society World Congress 2000 Contributed Papers 0066, Econometric Society.
    19. Poeschel, Friedrich, 2012. "The time trend in the matching function," IAB Discussion Paper 201203, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    20. Ewa Galecka-Burdziak, 2016. "Randomness or stock-flow: Which mechanism describes labour market matching in Poland?," Working Papers 2016-005, Warsaw School of Economics, Collegium of Economic Analysis.
    21. Haller, Peter & Heuermann, Daniel F., 2016. "Job search and hiring in local labor markets: Spillovers in regional matching functions," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 125-138.
    22. 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.
    23. F.A.G. den Butter & M. van Dijk, 1997. "The Pace of Structural Change, Cyclical Shocks and Unemployment Dynamics," Tinbergen Institute Discussion Papers 97-053/3, Tinbergen Institute.
    24. Sanna-Mari Ahtonen, 2004. "Matching across space: evidence from Finland," ERSA conference papers ersa04p205, European Regional Science Association.

    More about this item


    Matching; Temporal Aggregation Bias;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search


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