Estimating Matching Efficiency with Variable Search Effort

Estimating Matching Efficiency with Variable Search Effort, Link Online Appendix Slides

by Andreas Hornstein and Marianna Kudlyak, FRB SF WP No. 2016-24

Abstract: We introduce a simple representation of endogenous search effort into the standard matching function with job-seeker heterogeneity. Using the estimated augmented matching function, we study the sources of changes in the average employment transition rate. In the standard matching function, the contribution of matching efficiency is decreasing in the matching function elasticity. In contrast, for our matching function with variable search effort and small matching elasticity, search effort is procyclical, accounting for most of the transition rate volatility; and the decline of the aggregate matching efficiency accounts for a small part of the decline in the transition rate after 2007. For a large matching elasticity, search effort is countercyclical, and large movements in matching efficiency compensate for that; and the decline in the matching efficiency accounts for a large part of the decline in the transition rate after 2007. The data on employment transition rates provide evidence for endogenous search effort but do not separately identify cyclicality of search effort and matching elasticity.

Key words: Matching efficiency. Search effort. Matching elasticity. Aggregate matching function.

Presentations:

FRB Cleveland (2017-09)

EEA-ESEM (2017-08)

SED (2017-06-23)

UCS (2017-03-30)

FRB SF (2017-03-16)

UC Davis (2016-10-02)

A Stockman conference at the University of Rochester (10/16/2016)

Erasmus University Rotterdam (9/26/2016)

Tinbergen Institute (9/23/2016)

The 31st Congress of European Economic Association, Geneva, Switzerland (Aug 22-26,2016),