Match efficiency and firms' hiring standards

Journal article

During the last recession, new hires were lower than what would be predicted by a standard matching function and the observed ratio of searching workers and firms. This paper first estimates U.S. match efficiency as an exogenous residual in the matching function using a simple search and matching model. It finds match efficiency to be pro-cyclical and to account for about 1/4 of unemployment increases during the most severe recessions. Second, this paper proposes a model with endogenous separations and firing costs that endogenizes match efficiency, which is driven by firms’ hiring standards. The model can explain almost 1/2 of the variation in the initial estimate of match efficiency.

Authors: Sedláček, P

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: Elsevier
• Journal: Journal of Monetary Economics
• Volume: 62
• Issue: C
• Pages: 123-133
• Publication date: 2013-10-29
• Acceptance date: 2013-10-09
• DOI: 10.1016/j.jmoneco.2013.10.001
• EISSN: 1873-1295
• ISSN: 0304-3932
• Keywords: firms' hiring standards; endogenous separations; SBTMR; match efficiency; estimation