Search behavior of workers and firms and implications for matching outcomes
Final Report Abstract
The research project sheds light on how recruitment strategies of firms and job search behavior of workers matters for the labor market matching process. To do so, we link firm and worker survey data with the administrative matched employer-employee data of Germany’s Institute for Employment Research (IAB) to obtain novel empirical insights into the relationships between search/recruitment behavior and matching outcomes. We further develop structural labor market models which we estimate on the basis of our empirical findings and use the models for insights about labor market policy. Regarding recruitment behavior, we find that firms apply different recruitment strategies when they hire faster: They tend to pay higher wages, they are less selective in their hiring, and they exert more recruiting effort. When using these insights to quantify variation in matching efficiency across labor markets differentiated by skill and region, we find that especially the selectivity margin plays an important role. It also matters for labor market policy: Through the lens of our model, the reduction of unemployment benefits as part of Germany’s labor market reforms in the mid 2000s led to higher job finding via both strengthened job creation and a reduction in firms’ hiring standards, where the latter mechanism is particularly important in low-skill labor markets. We conclude that a sizable share of the “German Job Miracle” can be explained by this dimension of recruiting intensity. We further analyze the differential role of search channels for labor market matching. We document empirically that high-wage firms and high-wage workers match predominately through formal job postings, while low-wage firms and low-wage workers make use and succeed relatively more through networks of personal contacts or with the help of the public employment agency. Job postings also help workers to climb the job ladder faster than other search channels. We show with the help of our estimated model that these insights have important implications for labor market sorting. We further quantify the role of the public employment agency for productivity, employment and wage inequality. A counterfactual removal of the agency would bring about sizable losses of aggregate employment and output, with the largest job losses at the bottom of the productivity distribution and widening bottom wage inequality.
Publications
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A simple algorithm to link last hires from the Job Vacancy Survey to administrative records, FDZ Methodenreport 201906, Institute for Employment Research
Lochner, Benjamin
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A NOTE ON THE RELATION BETWEEN SEARCH COSTS AND SEARCH DURATION FOR NEW HIRES. Macroeconomic Dynamics, 26(1), 263-276.
Carbonero, Francesco & Gartner, Hermann
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IABSE-ADIAB – IAB Job Vacancy Survey Data Linked to Administrative Data. Jahrbücher für Nationalökonomie und Statistik, 244(1-2), 159-165.
Lochner, Benjamin
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Recruitment Policies, Job-Filling Rates, and Matching Efficiency. Journal of the European Economic Association, 21(6), 2413-2459.
Carrillo-Tudela, Carlos; Gartner, Hermann & Kaas, Leo
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The Quality‐Weighted Matching Function: Did the German Labor Market Reforms Trade‐Off Efficiency against Job Quality?. Journal of Money, Credit and Banking, 56(7), 1905-1914.
GARTNER, HERMANN; ROTHE, THOMAS & WEBER, ENZO
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How workers and firms meet in the labour market and why it matters, VoxEU column, January 12, 2024
Carrillo-Tudela, Carlos, Kaas, Leo & Lochner, Benjamin
