IDEAS home Printed from https://ideas.repec.org/p/pen/papers/16-021.html
   My bibliography  Save this paper

Evidence on the Relationship between Recruiting and the Starting Wage

Author

Listed:
  • R. Jason Faberman

    (Federal Reserve Bank of Chicago)

  • Guido Menzio

    (Department of Economics, University of Pennsylvania)

Abstract

Using data from the Employment Opportunity Pilot Project, we examine the relationship between the starting wage paid to the worker filling a vacancy, the number of applications attracted by the vacancy, the number of candidates interviewed for the vacancy, and the duration of the vacancy. We find that the wage is positively related to the duration of a vacancy and negatively related to the number of applications and interviews per week. We show that these surprising findings are consistent with a view of the labor market in which firms post wages and workers direct their search based on these wages if workers and jobs are heterogeneous and the interaction between worker’s type and job’s type in production satisfies some rather natural assumptions.

Suggested Citation

  • R. Jason Faberman & Guido Menzio, 2016. "Evidence on the Relationship between Recruiting and the Starting Wage," PIER Working Paper Archive 16-021, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 22 Nov 2016.
  • Handle: RePEc:pen:papers:16-021
    as

    Download full text from publisher

    File URL: https://economics.sas.upenn.edu/sites/default/files/filevault/SSRN%2016_021.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Vera Brenčič, 2012. "Wage posting: evidence from job ads," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1529-1559, November.
    2. Menzio, Guido & Shi, Shouyong, 2010. "Block recursive equilibria for stochastic models of search on the job," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1453-1494, July.
    3. Leo Kaas & Philipp Kircher, 2015. "Efficient Firm Dynamics in a Frictional Labor Market," American Economic Review, American Economic Association, vol. 105(10), pages 3030-3060, October.
    4. Harry J. Holzer, 1987. "Hiring Procedures in the Firm: Their Economic Determinants and Outcomes," NBER Working Papers 2185, National Bureau of Economic Research, Inc.
    5. Guido Menzio & Irina Telyukova & Ludo Visschers, 2016. "Directed Search over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 38-62, January.
    6. Michèle Belot & Philipp Kircher & Paul Muller, 2019. "Providing Advice to Jobseekers at Low Cost: An Experimental Study on Online Advice," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(4), pages 1411-1447.
    7. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
    8. Sicilian, Paul, 1995. "Employer search and worker-firm match quality," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(35), pages 515-532.
    9. Guido Menzio & Shouyong Shi, 2011. "Efficient Search on the Job and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 468-510.
    10. Yannis M. Ioannides & Linda Datcher Loury, 2004. "Job Information Networks, Neighborhood Effects, and Inequality," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1056-1093, December.
    11. Barron, John M & Berger, Mark C & Black, Dan A, 1997. "Employer Search, Training, and Vacancy Duration," Economic Inquiry, Western Economic Association International, vol. 35(1), pages 167-192, January.
    12. Galenianos, Manolis, 2014. "Hiring through referrals," Journal of Economic Theory, Elsevier, vol. 152(C), pages 304-323.
    13. Robert E. Hall & Alan B. Krueger, 2012. "Evidence on the Incidence of Wage Posting, Wage Bargaining, and On-the-Job Search," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(4), pages 56-67, October.
    14. Steven J. Davis & R. Jason Faberman & John C. Haltiwanger, 2013. "The Establishment-Level Behavior of Vacancies and Hiring," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(2), pages 581-622.
    15. Barron, John M & Bishop, John & Dunkelberg, William C, 1985. "Employer Search: The Interviewing and Hiring of New Employees," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 43-52, February.
    16. Amanda Pallais & Emily Glassberg Sands, 2016. "Why the Referential Treatment? Evidence from Field Experiments on Referrals," Journal of Political Economy, University of Chicago Press, vol. 124(6), pages 1793-1828.
    17. Ioana Marinescu & Ronald Wolthoff, 2020. "Opening the Black Box of the Matching Function: The Power of Words," Journal of Labor Economics, University of Chicago Press, vol. 38(2), pages 535-568.
    18. Stephen V. Burks & Bo Cowgill & Mitchell Hoffman & Michael Housman, 2015. "The Value of Hiring through Employee Referrals," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(2), pages 805-839.
    19. Shouyong Shi, 2002. "A Directed Search Model of Inequality with Heterogeneous Skills and Skill-Biased Technology," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(2), pages 467-491.
    20. Burdett, Kenneth & Cunningham, Elizabeth J, 1998. "Toward a Theory of Vacancies," Journal of Labor Economics, University of Chicago Press, vol. 16(3), pages 445-478, July.
    21. van Ours, Jan & Ridder, Geert, 1992. "Vacancies and the Recruitment of New Employees," Journal of Labor Economics, University of Chicago Press, vol. 10(2), pages 138-155, April.
    22. M. J. Andrews & S. Bradley & D. Stott & R. Upward, 2008. "Successful Employer Search? An Empirical Analysis of Vacancy Duration Using Micro Data," Economica, London School of Economics and Political Science, vol. 75(299), pages 455-480, August.
    23. Ronald Wolthoff, 2018. "Applications and Interviews: Firms’ Recruiting Decisions in a Frictional Labour Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(2), pages 1314-1351.
    24. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
    25. Harry J. Holzer & Lawrence F. Katz & Alan B. Krueger, 1991. "Job Queues and Wages," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 739-768.
    26. Edouard Schaal, 2017. "Uncertainty and Unemployment," Econometrica, Econometric Society, vol. 85(6), pages 1675-1721, November.
    27. James D. Montgomery, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(1), pages 163-179.
    28. Robert Shimer, 2005. "The Assignment of Workers to Jobs in an Economy with Coordination Frictions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 996-1025, October.
    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. Bhuller, Manudeep & Kostøl, Andreas & Vigtel, Trond Christian, 2019. "How Broadband Internet Affects Labor Market Matching," Memorandum 10/2019, Oslo University, Department of Economics.
    2. Bagger, Jesper & Fontaine, Francois & Galenianos, Manolis & Trapeznikova, Ija, 2022. "Vacancies, employment outcomes and firm growth: Evidence from Denmark," Labour Economics, Elsevier, vol. 75(C).
    3. Ioana Marinescu & Ronald Wolthoff, 2020. "Opening the Black Box of the Matching Function: The Power of Words," Journal of Labor Economics, University of Chicago Press, vol. 38(2), pages 535-568.
    4. Julien Pascal, 2023. "Rental housing market and directed search," BCL working papers 179, Central Bank of Luxembourg.
    5. Michèle Belot & Philipp Kircher & Paul Muller, 2022. "How Wage Announcements Affect Job Search—A Field Experiment," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(4), pages 1-67, October.
    6. Morgan Raux, 2019. "Looking for the "Best and Brightest": Hiring difficulties and high-skilled foreign workers," Working Papers halshs-02364921, HAL.
    7. Andreas Kettemann & Andreas I. Mueller & Josef Zweimüller, 2018. "Vacancy durations and entry wages: evidence from linked vacancy-employer-employee data," ECON - Working Papers 312, Department of Economics - University of Zurich.
    8. Ciao-Wei Chen & Laura Yue Li, 2023. "Is hiring fast a good sign? The informativeness of job vacancy duration for future firm profitability," Review of Accounting Studies, Springer, vol. 28(3), pages 1316-1353, September.
    9. Paolo Martellini & Guido Menzio, 2020. "Declining Search Frictions, Unemployment, and Growth," Journal of Political Economy, University of Chicago Press, vol. 128(12), pages 4387-4437.
    10. Serdar Birinci & Kurt See & Shu Lin Wee, 2020. "Job Applications and Labor Market Flows," Working Papers 2020-023, Federal Reserve Bank of St. Louis, revised Jan 2023.
    11. Ronald Wolthoff & Ioana Marinescu, 2012. "Wages, Job Queues, and Skills," 2012 Meeting Papers 592, Society for Economic Dynamics.
    12. Kircher, Philipp & Wright, Randall & Julien, Benoit & Guerrieri, Veronica, 2017. "Directed Search: A Guided Tour," CEPR Discussion Papers 12315, C.E.P.R. Discussion Papers.
    13. Ke & Ma & Sophie Yanying Sheng & Haitian Xie, 2023. "Employer Reputation and the Labor Market: Evidence from Glassdoor.com and Dice.com," Papers 2305.02587, arXiv.org, revised Sep 2023.
    14. Ronald Wolthoff, 2018. "Applications and Interviews: Firms’ Recruiting Decisions in a Frictional Labour Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(2), pages 1314-1351.
    15. Kircher, Philipp A.T., 2020. "Search design and online job search – new avenues for applied and experimental research," Labour Economics, Elsevier, vol. 64(C).
    16. Bassier, Ihsaan & Manning, Alan & Petrongolo, Barbara, 2023. "Vacancy Duration and Wages," IZA Discussion Papers 16371, Institute of Labor Economics (IZA).
    17. Ehrenfried, Felix & Holzner, Christian, 2019. "Dynamics and endogeneity of firms’ recruitment behaviour," Labour Economics, Elsevier, vol. 57(C), pages 63-84.
    18. Andrew Weaver, 2021. "Hiring Frictions in a Regulated Occupation: Evidence from US Laboratories," British Journal of Industrial Relations, London School of Economics, vol. 59(3), pages 899-927, September.
    19. Jason Sockin, 2022. "Show Me the Amenity: Are Higher-Paying Firms Better All Around?," CESifo Working Paper Series 9842, CESifo.
    20. Götz, Valentina & Isphording, Ingo E. & Rinne, Ulf & Trenkle, Simon, 2024. "Fachkräftesicherung und Mitarbeiterbindung aus Sicht von Betrieben und Beschäftigten," IZA Research Reports 141, Institute of Labor Economics (IZA).
    21. Forsythe, Eliza & Weinstein, Russell, 2021. "Recruiting Intensity, Hires, and Vacancies: Evidence from Firm-Level Data," IZA Discussion Papers 14138, Institute of Labor Economics (IZA).
    22. Michael W. L. Elsby & Ryan Michaels & David Ratner, 2015. "The Beveridge Curve: A Survey," Journal of Economic Literature, American Economic Association, vol. 53(3), pages 571-630, September.
    23. Rao, Neel, 2022. "Search equilibrium with unobservable investment," Games and Economic Behavior, Elsevier, vol. 133(C), pages 300-330.
    24. Ihsaan Bassier & Alan Manning & Barbara Petrongolo, 2023. "Vacancy duration and wages," CEP Discussion Papers dp1943, Centre for Economic Performance, LSE.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kircher, Philipp & Wright, Randall & Julien, Benoit & Guerrieri, Veronica, 2017. "Directed Search: A Guided Tour," CEPR Discussion Papers 12315, C.E.P.R. Discussion Papers.
    2. 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.
    3. Ronald Wolthoff, 2010. "Applications and Interviews: A Structural Analysis of Two-Sided Simultaneous Search," 2010 Meeting Papers 114, Society for Economic Dynamics.
    4. Carlos Carrillo-Tudela & Hermann Gartner & Leo Kaas, 2023. "Recruitment Policies, Job-Filling Rates, and Matching Efficiency," Journal of the European Economic Association, European Economic Association, vol. 21(6), pages 2413-2459.
    5. Lester, Benjamin, 2010. "Directed search with multi-vacancy firms," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2108-2132, November.
    6. Moon, Ji-Woong, 2023. "Strategic referrals and on-the-job search equilibrium," Journal of Monetary Economics, Elsevier, vol. 134(C), pages 135-151.
    7. Ioana Marinescu & Ronald Wolthoff, 2020. "Opening the Black Box of the Matching Function: The Power of Words," Journal of Labor Economics, University of Chicago Press, vol. 38(2), pages 535-568.
    8. Mangin, Sephorah, 2017. "A theory of production, matching, and distribution," Journal of Economic Theory, Elsevier, vol. 172(C), pages 376-409.
    9. Ronald Wolthoff, 2018. "Applications and Interviews: Firms’ Recruiting Decisions in a Frictional Labour Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(2), pages 1314-1351.
    10. Oyer, Paul & Schaefer, Scott, 2011. "Personnel Economics: Hiring and Incentives," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 20, pages 1769-1823, Elsevier.
    11. Cai, Xiaoming & Gautier, Pieter A. & Wolthoff, Ronald P., 2017. "Search frictions, competing mechanisms and optimal market segmentation," Journal of Economic Theory, Elsevier, vol. 169(C), pages 453-473.
    12. Leo Kaas & Philipp Kircher, 2015. "Efficient Firm Dynamics in a Frictional Labor Market," American Economic Review, American Economic Association, vol. 105(10), pages 3030-3060, October.
    13. Carlos Carrillo‐Tudela & Ludo Visschers, 2023. "Unemployment and Endogenous Reallocation Over the Business Cycle," Econometrica, Econometric Society, vol. 91(3), pages 1119-1153, May.
    14. Bhuller, Manudeep & Kostøl, Andreas & Vigtel, Trond Christian, 2019. "How Broadband Internet Affects Labor Market Matching," Memorandum 10/2019, Oslo University, Department of Economics.
    15. Neele Balke & Thibaut Lamadon, 2020. "Productivity Shocks, Long-Term Contracts and Earnings Dynamics," NBER Working Papers 28060, National Bureau of Economic Research, Inc.
    16. Philipp Kircher, 2009. "Efficiency of Simultaneous Search," Journal of Political Economy, University of Chicago Press, vol. 117(5), pages 861-913, October.
    17. Balke, Neele & Lamadon, Thibaut, 2021. "Productivity shocks, long-term contracts and earnings dynamics," Working Paper Series 2021:19, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    18. Hector Chade & Jan Eeckhout & Lones Smith, 2017. "Sorting through Search and Matching Models in Economics," Journal of Economic Literature, American Economic Association, vol. 55(2), pages 493-544, June.
    19. Shouyong Shi, 2009. "Directed Search for Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, vol. 77(2), pages 561-584, March.
    20. Shi, Shouyong, 2016. "Customer relationship and sales," Journal of Economic Theory, Elsevier, vol. 166(C), pages 483-516.

    More about this item

    Keywords

    wage posting; employer recruiting; hiring; vacancies; directed search;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

    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:pen:papers:16-021. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Administrator (email available below). General contact details of provider: https://edirc.repec.org/data/deupaus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.