IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/2467.html
   My bibliography  Save this paper

Scale effects in markets with search

Author

Listed:
  • Petrongolo, Barbara
  • Pissarides, Christopher

Abstract

Reduced-form tests of scale effects in markets with search, based on aggregate matching functions, may miss important scale effects at the micro level, because of the reactions of job searchers. We estimate a semi-structural model on a British sample of unemployed people, testing for scale effects on the offer arrival rate and the wage offer distribution. We find scale effects in wage offers but not in offer arrival rates. We also find that reservation wages rise to deliver higher post-unemployment wages but not faster matches, so aggregate matching functions are unaffected by scale.

Suggested Citation

  • Petrongolo, Barbara & Pissarides, Christopher, 2006. "Scale effects in markets with search," LSE Research Online Documents on Economics 2467, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:2467
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/2467/
    File Function: Open access version.
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. van den Berg, Gerard J & Gorter, Cees, 1997. "Job Search and Commuting Time," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 269-281, April.
    2. Zvi Eckstein & Kenneth I. Wolpin, 1995. "Duration to First Job and the Return to Schooling: Estimates from a Search-Matching Model," Review of Economic Studies, Oxford University Press, vol. 62(2), pages 263-286.
    3. Christensen, Bent Jesper & Kiefer, Nicholas M, 1994. "Measurement Error in the Prototypal Job-Search Model," Journal of Labor Economics, University of Chicago Press, vol. 12(4), pages 618-639, October.
    4. 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.
    5. Bloemen, Hans G & Stancanelli, Elena G F, 2001. "Individual Wealth, Reservation Wages, and Transitions into Employment," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 400-439, April.
    6. Narendranathan, Wiji & Stewart, Mark B., 1989. "Modelling the Probability of Leaving Unemployment: Competing Risks Models with Flexible Baseline Hazards," Economic Research Papers 268365, University of Warwick - Department of Economics.
    7. Alan Manning & J Thomas, 1997. "A Simple Test of the Shirking Model," CEP Discussion Papers dp0374, Centre for Economic Performance, LSE.
    8. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-894, October.
    9. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-1676, November.
    10. Gerard J. van den Berg, 1990. "Nonstationarity in Job Search Theory," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 255-277.
    11. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March.
    12. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-1059, October.
    13. Coles, Melvyn G & Smith, Eric, 1996. "Cross-Section Estimation of the Matching Function: Evidence from England and Wales," Economica, London School of Economics and Political Science, vol. 63(252), pages 589-597, November.
    14. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-342, April.
    15. Olivier Jean Blanchard & Peter A. Diamond, 1989. "The Aggregate Matching Function," NBER Working Papers 3175, National Bureau of Economic Research, Inc.
    16. Barron, John M, 1975. "Search in the Labor Market and the Duration of Unemployment: Some Empirical Evidence," American Economic Review, American Economic Association, vol. 65(5), pages 934-942, December.
    17. Eran Yashiv, 2000. "The Determinants of Equilibrium Unemployment," American Economic Review, American Economic Association, vol. 90(5), pages 1297-1322, December.
    18. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    19. Flinn, C. & Heckman, J., 1982. "New methods for analyzing structural models of labor force dynamics," Journal of Econometrics, Elsevier, vol. 18(1), pages 115-168, January.
    20. Warren, Ronald Jr., 1996. "Returns to scale in a matching model of the labor market," Economics Letters, Elsevier, vol. 50(1), pages 135-142, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cacciatore, Matteo & Duval, Romain & Fiori, Giuseppe & Ghironi, Fabio, 2016. "Short-term pain for long-term gain: Market deregulation and monetary policy in small open economies," Journal of International Money and Finance, Elsevier, vol. 68(C), pages 358-385.
    2. Sabrina Di Addario, 2005. "Job Search in Thick Markets: Evidence from Italy," Development Working Papers 198, Centro Studi Luca d'Agliano, University of Milano.
    3. Amiti, Mary & Pissarides, Christopher A., 2005. "Trade and industrial location with heterogeneous labor," Journal of International Economics, Elsevier, vol. 67(2), pages 392-412, December.
    4. Cacciatore, Matteo & Ghironi, Fabio & Lee, Yurim, 2016. "Financial market integration, exchange rate policy, and the dynamics of business and employment in Korea," Journal of the Japanese and International Economies, Elsevier, vol. 42(C), pages 79-99.
    5. L. Rachel Ngai & Silvana Tenreyro, 2014. "Hot and Cold Seasons in the Housing Market," American Economic Review, American Economic Association, vol. 104(12), pages 3991-4026, December.
    6. 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.
    7. Ayça Akarçay Gürbüz & Sezgin Polat & Mustafa Ulus, 2014. "In Limbo: Exploring Transition to Discouragement," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 26(4), pages 527-551, September.
    8. Mark Stater & Jeffrey B Wenger, 2017. "The Immediate Hardship of Unemployment: Evidence from the US Unemployment Insurance System," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 43(1), pages 17-36, January.
    9. Cacciatore, Matteo & Duval, Romain & Fiori, Giuseppe & Ghironi, Fabio, 2016. "Market reforms in the time of imbalance," Journal of Economic Dynamics and Control, Elsevier, vol. 72(C), pages 69-93.
    10. Timothy E. Dore & Rebecca Zarutskie, 2018. "Firm Leverage, Labor Market Size, and Employee Pay," Working Papers 18-36, Center for Economic Studies, U.S. Census Bureau.
    11. Paolo Martellini & Guido Menzio, 2018. "Declining Search Frictions, Unemployment and Growth," NBER Working Papers 24518, National Bureau of Economic Research, Inc.
    12. Gautier, P.A. & Teulings, C.N., 2009. "Search and the city," Regional Science and Urban Economics, Elsevier, vol. 39(3), pages 251-265, May.
    13. Torfs, Wouter & Zhao, Liqiu, 2015. "Everybody needs good neighbors? Labor mobility costs, cities and matching," Regional Science and Urban Economics, Elsevier, vol. 55(C), pages 39-54.
    14. Bleakley, Hoyt & Lin, Jeffrey, 2012. "Thick-market effects and churning in the labor market: Evidence from US cities," Journal of Urban Economics, Elsevier, vol. 72(2), pages 87-103.
    15. Andersson, Fredrik & Burgess, Simon & Lane, Julia I., 2007. "Cities, matching and the productivity gains of agglomeration," Journal of Urban Economics, Elsevier, vol. 61(1), pages 112-128, January.
    16. Matteo Cacciatore & Giuseppe Fiori, 2016. "The Macroeconomic Effects of Goods and Labor Marlet Deregulation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 20, pages 1-24, April.
    17. Di Addario, Sabrina, 2011. "Job search in thick markets," Journal of Urban Economics, Elsevier, vol. 69(3), pages 303-318, May.
    18. repec:jns:jbstat:v:227:y:2007:i:2:p:115-152 is not listed on IDEAS
    19. Xi Yang, 2014. "Labor market frictions, agglomeration, and regional unemployment disparities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(2), pages 489-512, March.
    20. Lollivier, Stefan & Rioux, Laurence, 2005. "A Structural Non-Stationary Model of Job Search: Stigmatization of the Unemployed by Job Offers or Wage Offers?," CEPR Discussion Papers 5108, C.E.P.R. Discussion Papers.
    21. J. Meekes & W.H.J. Hassink, 2018. "Endogenous local labour markets, regional aggregation and agglomeration economies," Working Papers 18-03, Utrecht School of Economics.
    22. Cristiano Codagnone & Fabienne Abadie & Federico Biagi, 2016. "The Future of Work in the ‘Sharing Economy’. Market Efficiency and Equitable Opportunities or Unfair Precarisation?," JRC Working Papers JRC101280, Joint Research Centre (Seville site).
    23. Yip, Chi Man, 2011. "Size and The City: Productivity, Match Quality and Wage Inequality," MPRA Paper 31255, University Library of Munich, Germany.
    24. Timothy E Dore & Rebecca Zarutskie, 2017. "Firm Leverage, Labor Market Size, and Employee Pay," Finance and Economics Discussion Series 2017-078, Board of Governors of the Federal Reserve System (US).

    More about this item

    Keywords

    Job search; economies of scale; matching; aggregate matching functions; wage offer distribution; unemployment;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:2467. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (LSERO Manager). General contact details of provider: http://edirc.repec.org/data/lsepsuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.