Research Interests : Macro Labor - Search and Matching, Networks and Inequality

Papers

"The Cyclical Behavior of a Firm's Optimal Market and Referral Hiring (PDF)

Abstract: Empirical evidence from the United States (U.S.) and Greece shows that referral hiring is procyclical and market hiring is countercyclical with labor productivity. To account for this pattern, I build and calibrate a search-and-matching model with labor productivity shocks to formulate the economic mechanisms driving the firms' market and referral hiring decisions. In steady state, relative to market hiring, referrals yield a lower applicant arrival rate, a higher and more elastic arrival rate of potentially good-fit applicants, and a lower hiring cost--a quantity-quality-cost trade-off that drives firms' optimal choices. The model also allows for systematic preference bias in favor of referred candidates, implemented as a bias in firms' perceived referral filling rate, which amplifies the responsiveness of hiring to shocks. Over the cycle, the model replicates the hiring pattern during a recession: firms increase market hiring and decrease referral hiring. Quantitatively, the model explains about 25-30% of the cyclical variation in hiring in the U.S. and, in the Greek data, all of the variation in market hiring and 20% of the variation in referral hiring. The smaller share for Greek referral hiring reflects the fact that market hiring is much less volatile in Greece--its variation is only about 20% of that in the U.S..

"Market vs Referral Hiring: Implications on Welfare, Aggregate Match Quality and Wage Inequality (draft undergoing changes ) 

Abstract: Empirical evidence from the Survey of Consumer Expectations (SCE) for the United States over 2013--2021 indicates that, on average, about 50% of workers hired in a given year are hired through either employee referrals or the market channel. This paper builds and calibrates a deterministic Diamond--Mortensen--Pissarides (DMP) search-and-matching model without on-the-job search to study what governs a firm’s optimal market and referral hiring decisions. At the calibrated steady state, I find that, relative to the referral channel, the market channel has a higher matching rate and a higher hiring cost, but a lower probability that the match is good. This quantity–quality–cost tradeoff characterizes a firm’s optimal hiring decisions. Furthermore, I simulate the model to show that the market hiring rate decreases and the referral hiring rate increases with labor productivity, implying higher aggregate match quality and an expected wage gap that favors referred applicants. On the policy side, higher unemployment benefits decrease vacancy postings, which in turn increase the unemployment rate, reduce market tightness, encourage market hiring, and discourage referral hiring. The simulation exercise suggests that social welfare peaks at a benefit level 11% above the calibrated steady-state level, with welfare gains on the order of 0.27%.

Work in Progress

"A Dynamic Model of a Firm's Market and Referral Hiring"

"Optimal Unemployment Insurance and Firm's Market & Referral Hiring "