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On the effects of ranking by unemployment duration

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  • Fernandez-Blanco, Javier
  • Preugschat, Edgar

Abstract

We propose a theory based on the firm’s hiring behavior that rationalizes the observed significant decline of callback rates for an interview and exit rates from unemployment and the mild decline of reemployment wages over unemployment duration. We build a directed search model with symmetric incomplete information on worker types and non-sequential search by firms. Sorting due to firms’ testing of applicants in the past makes expected productivity fall with duration, which induces firms to rank applicants by duration. In equilibrium callback and exit rates both fall with unemployment duration. In our numerical exercise using U.S. data we show that our model can replicate quite well the observed falling patterns, with the firm’s ranking decision accounting for a sizable part.

Suggested Citation

  • Fernandez-Blanco, Javier & Preugschat, Edgar, 2017. "On the effects of ranking by unemployment duration," MPRA Paper 85310, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:85310
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. On the effects of ranking by unemployment duration
      by Christian Zimmermann in NEP-DGE blog on 2018-05-11 18:53:45

    More about this item

    Keywords

    Ranking Sorting Directed search;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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