School Brown Bag: Cindy Fu

Meeting and matching: new evidence on search in the labour market (with Martyn Andrews and Richard Upward)

Abstract: We provide the first estimates of the hazards to matching on both sides of the same labour market, decomposed into their constituent parts, namely “meetings” (the rate at which job-seekers and vacancies contact each other) and “matching” (the probability that these contacts result in a match). Decomposing the overall hazard rate enables us to answer three questions which are central to the search and matching literature. First, whether it becomes harder for agents to match as time passes because they receive fewer contacts or because contacts are less likely to be successful. Second, whether the effects of labour market tightness operate through meetings or matches. Third, whether job-seeker and vacancy attributes which increase or decrease search effectiveness do so through meetings or matches.

In the raw data the decline in the matching rate is driven by a decline in the contact rate, and not by any fall in the probability of a match conditional on a contact. We estimate a two-sided matching model to determine whether this result is caused by omitted observed or unobserved heterogeneity in job-seekers and vacancies. It also allows us to estimate the parameters of the individual components of the matching function. We find that the same result applies as in the raw data: the decline in the matching rate on both sides of the market is driven by the decline in the contact rate.

Lunch from 12.30pm