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Re-employment probabilities and returns to matching

By Barbara Petrongolo

Abstract

The assumption of constant returns in the matching function, embodied in most bilateral search models, is crucial to ensure the uniqueness of the unemployment rate along a steady state growth path. This Paper explores whether this is an acceptable assumption by estimating individual reemployment probabilities on a sample of entrants into unemployment. This is done by applying hazard models to survey data on both completed and uncompleted unemployment durations. The hypothesis of constant returns to matching is not rejected, on the basis of the evidence that the job-finding hazard only depends on local labour market tightness and it is independent of its size

Topics: HD Industries. Land use. Labor
Publisher: Centre for Economic Policy Research
Year: 1999
OAI identifier: oai:eprints.lse.ac.uk:5331
Provided by: LSE Research Online
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