Defining and Measuring Unmet Labour Demand

This paper first clarifies the distinction between vacancies as ‘job openings’ (recruitment processes), which are measured in traditional vacancy statistics, and vacancies as ‘unfilled jobs’ (unmet labour demand). It then presents a method of measuring unmet demand in enterprise surveys and illustrates this method with statistics from a new vacancy survey in Sweden.Job vacancies; unmet labour demand

Vacancies, Hirings, and the Duration Function

While the matching function relates hirings (H) to vacancies (V) and unemployment, the duration function relates the average duration of vacancies as measured by V/H to unemployment. Shifts of the duration function are equivalent to shifts of the matching function but easier to interpret. Therefore, this paper focuses on the microfoundations of the duration function. We find, first, that outward shifts of the duration function, or, equivalently, longer recruitment times at given unemployment, have no direct effects on hirings. Second, the effect of longer recruitment times on hirings through higher recruitment costs depends on the relative importance of vacancy costs in total recruitment costs, where vacancy costs include the opportunity cost of unfilled jobs. Third, this paper reports information on unfilled jobs (unmet demand) as distinct from job vacancies (recruitment processes) according to a new business survey in Sweden.Job vacancies; hirings; friction; matching function; Beveridge curve

Market Sharing and Price Leadership

This paper proposes an alternative to the traditional model of supply and demand in markets where consumers take prices as given. Within the framework of “no side payments and partial preplay communication” firms are assumed to decide non-cooperatively on production and marketing while the market price is set by a competitive price leader, i.e. a firm preferring the lowest market price. Predictions include excess supply and a revenuemaximizing market price in markets where production precedes sales. In markets where sales precede production competitive price leadership predicts monopoly pricing but not necessarily monopoly profits if firms are “sufficiently similar”, while the presence of firms with high costs or low capacities will make it possible for the price leader, in some circumstances, to increase its market share and also its profits by reducing its price. And the threat of costly competition for market shares may reduce the market price even for identical firms.Pricing; oligopoly; price leadership; market sharing

A Theory of Vacancies

This paper is, firstly, a reappraisal of the matching function, arguing that the proper specification of the relation between hirings (H), vacancies (V), and unemployment is the duration function, which shows how average recruitment times as measured by V/H depend on unemployment and other relevant variables. Secondly, indirect effects of longer recruitment times on employment through higher recruitment costs are studied by extending previous models to include both price formation and the distinction between vacancy costs and hiring costs. Thirdly, direct effects of longer recruitment times on employment through more unfilled jobs are explored and illustrated with data from Sweden since 2000 from a new business survey, which measures not only job vacancies but also unfilled jobs.Vacancies; hirings; matching function; friction

Unemployment and Vacancies

How can vacancy statistics be used to measure friction in job matching and the effects of friction on unemployment? First, measure deviations from instantaneous hirings by the average duration of recruitment as measured by the number of job vacancies divided by the number of hirings per month. Second, measure direct effects of recruitment times on employment by measuring unfilled jobs, defined as unoccupied job vacancies which are available immediately. Third, measure indirect effects of recruitment times on employment by estimating first the effect of recruitment times on product prices and then the effect of a price change on sales, production and employment. Fourth, measure ‘search ineffectiveness’ with potential effects on the NAIRU by the rate of unfilled jobs.Unemployment; vacancies; matching function; labour demand; friction