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Accounting For Endogenous Search Behavior in Matching Function Estimation

  • Borowczyk-Martins, Daniel

    ()

    (Sciences Po, Paris)

  • Jolivet, Grégory

    ()

    (University of Bristol)

  • Postel-Vinay, Fabien

    ()

    (University College London)

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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5807.

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Length: 17 pages
Date of creation: Jun 2011
Date of revision:
Publication status: published in: Review of Economic Dynamics, 2013, 16, 440–451
Handle: RePEc:iza:izadps:dp5807
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  1. 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.
  2. Sunde, Uwe, 2007. "Empirical matching functions: Searchers, vacancies, and (un-)biased elasticities," Munich Reprints in Economics 19586, University of Munich, Department of Economics.
  3. 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.
  4. Eran Yashiv, 2000. "The Determinants of Equilibrium Unemployment," American Economic Review, American Economic Association, vol. 90(5), pages 1297-1322, December.
  5. Yashiv, Eran, 2007. "Labor Search and Matching in Macroeconomics," IZA Discussion Papers 2743, Institute for the Study of Labor (IZA).
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  7. 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.).
  8. Fahr, René & Sunde, Uwe, 2005. "Job and vacancy competition in empirical matching functions," Munich Reprints in Economics 20487, University of Munich, Department of Economics.
  9. Gregory, Allan W. & Veall, Michael R., 1986. "Wald tests of common factor restrictions," Economics Letters, Elsevier, vol. 22(2-3), pages 203-208.
  10. Coles, Melvyn G & Petrongolo, Barbara, 2002. "A Test Between Unemployment Theories Using Matching Data," CEPR Discussion Papers 3241, C.E.P.R. Discussion Papers.
  11. 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.
  12. 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.
  13. Eran Yashiv, 2007. "Labor Search and Matching in Macroeconomics," CEP Discussion Papers dp0803, Centre for Economic Performance, LSE.
  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. Stock, James H, 1987. "Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors," Econometrica, Econometric Society, vol. 55(5), pages 1035-56, September.
  16. 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.
  17. 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, October.
  18. Yashiv, Eran, 2007. "Labor search and matching in macroeconomics," European Economic Review, Elsevier, vol. 51(8), pages 1859-1895, November.
  19. 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.
  20. 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.
  21. 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.
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