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Aggregate Implications of Employer Search and Recruiting Selection

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  • Benjamín Villena Roldán

Abstract

This paper develops a general equilibrium model of nonsequential employer search with recruiting selection and heterogeneous workers, and characterizes its equilibrium. I depart from the standard search model by allowing firms to simultaneously meet several applicants and choose the best candidate. Recruiting selection is important: firms interview a median of 5 applicants per vacancy and spend 2.5% of their total labor cost-about US$4200 per recruit - in these activities. The model provides an endogenous matching process with heterogeneous workers in which the hazard rate out of unemployment increases in productivity. The model also accounts for the empirical evidence of negative duration dependence of both hazard rates and re-employment wages. Under recruiting selection, lifetime inequality increases relative to the sequential search benchmark because low wage workers go through longer and more volatile unemployment spells, and have less valuable outside options to bargain with firms. I also show that stronger recruiting selection worsens the productivity of the unemployed and may not generate a more efficient job assignment at the aggregate level. Search frictions coupled with recruiting selection generate new kinds of externalities that affect not only transition probabilities, but also the expected productivity of recruited workers. The calibrated model can replicate moments of the distribution of wages and unemployment durations in CPS data. Using this parametrization, I also show that an increase of screening costs reduces inequality and productive efficiency, and decreases negative externalities on other employers.

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  • Benjamín Villena Roldán, 2010. "Aggregate Implications of Employer Search and Recruiting Selection," Documentos de Trabajo 271, Centro de Economía Aplicada, Universidad de Chile.
  • Handle: RePEc:edj:ceauch:271
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    Cited by:

    1. Carlos Carrillo-Tudela & Hermann Gartner & Leo Kaas, 2020. "Recruitment Policies, Job-Filling Rates and Matching Efficiency," CESifo Working Paper Series 8299, CESifo.
    2. Federico Ravenna & Carl E. Walsh, 2012. "Screening and Labor Market Flows in a Model with Heterogeneous Workers," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 31-71, December.
    3. Landais, Camille & Michaillat, Pascal & Saez, Emmanuel, 2010. "Optimal unemployment insurance over the business cycle," LSE Research Online Documents on Economics 35596, London School of Economics and Political Science, LSE Library.
    4. Ronald Wolthoff, 2010. "Applications and Interviews: A Structural Analysis of Two-Sided Simultaneous Search," 2010 Meeting Papers 114, Society for Economic Dynamics.
    5. Robert E. Hall & Marianna Kudlyak, 2021. "Why Has the US Economy Recovered So Consistently from Every Recession in the Past 70 Years?," NBER Chapters, in: NBER Macroeconomics Annual 2021, volume 36, National Bureau of Economic Research, Inc.
    6. Ronald Wolthoff, 2018. "Applications and Interviews: Firms’ Recruiting Decisions in a Frictional Labour Market," Review of Economic Studies, Oxford University Press, vol. 85(2), pages 1314-1351.
    7. Camille Landais & Pascal Michaillat & Emmanuel Saez, 2018. "A Macroeconomic Approach to Optimal Unemployment Insurance: Theory," American Economic Journal: Economic Policy, American Economic Association, vol. 10(2), pages 152-181, May.
    8. Benjamín Villena Roldán, 2010. "Wage dispersion and Recruiting Selection," Documentos de Trabajo 270, Centro de Economía Aplicada, Universidad de Chile.
    9. Stefano Banfi & Benjamín Villena-Roldán, 2019. "Do High-Wage Jobs Attract More Applicants? Directed Search Evidence from the Online Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 37(3), pages 715-746.
    10. Jake Bradley, 2020. "Worker-firm screening and the business cycle," Discussion Papers 2020/11, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    11. Meier, Mario & Obermeier, Tim, 2017. "Employer Screening, Unemployment Stigma and Optimal Unemployment Insurance," EconStor Preprints 148303, ZBW - Leibniz Information Centre for Economics.
    12. Carl E. Walsh & Federico Ravenna, 2010. "Business Cycles and Labor Market Flows with Sequential Screening," 2010 Meeting Papers 571, Society for Economic Dynamics.
    13. Camille Landais & Pascal Michaillat & Emmanuel Saez, 2018. "A Macroeconomic Approach to Optimal Unemployment Insurance: Applications," American Economic Journal: Economic Policy, American Economic Association, vol. 10(2), pages 182-216, May.
    14. Pascal Michaillat & Emmanuel Saez, 2019. "Beveridgean Unemployment Gap," Papers 1911.05271, arXiv.org, revised Nov 2021.
    15. Zhaochen He, 2017. "The Contractionary Effect of Bad Economic News," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(6), pages 1339-1384, September.

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