The time trend in the matching function

"We revisit the puzzling finding that labour market performance appears to deteriorate, as suggested by negative time trends in empirical matching functions. We investigate whether these trends simply arise from omitted variable bias. Concretely, we consider the omission of job seekers beyond the unemployed, the omission of inflows as opposed to stocks, and the failure to account for vacancy dynamics. We first build a model of all labour market flows and use it to construct series for these flows from aggregate data on the U.S. labour market. Using these series, we obtain a measure for employed and non-participating job seekers. When we thus include all job seekers, the estimated time trend remains unchanged. We similarly obtain measures for inflows into unemployment and vacancies. When these are included, the magnitude of the time trend is halved but remains significant. When we account for basic vacancy dynamics, the estimated time trend can be fully explained by omitted variable bias. As suggested by this result, we present evidence that empirical matching functions can be interpreted as versions of the law of motion for vacancies: the coefficients in matching functions coincide with the coefficients in the law of motion after correcting for omitted variable bias." (Author's abstract, IAB-Doku) ((en))Zeitreihenanalyse, matching, Arbeitsmarktindikatoren, offene Stellen, Arbeitsuchende, Arbeitslose, Nichterwerbstätige, USA, Bundesrepublik Deutschland, Bundesrepublik Deutschland

Assortative matching through signals

We model signalling in two-sided sequential search with heterogeneous agents and transferable utility. Search via meetings is time-consuming and thereby costly due to discounting. Search via signals is costless, so that agents can avoid almost all search costs if only the signals are truthful. We show that signals will indeed be truthful if the match output function is su ciently super- modular. The unique separating equilibrium is then characterised by perfect positive assortative matching despite the search frictions. In this equilibrium, agents successfully conclude their search after a single meeting, and overall match output is maximised. These results continue to hold when there are also explicit search costs in addition to discounting.assortative matching ; supermodularity ; signals