Revisiting the matching function

There is strong empirical evidence for Cobb–Douglas matching functions. We show in this paper that this widely found relation between matches on the one hand and unemployment and vacancies on the other hand can be the result of different underlying mechanisms. Obviously, it can be generated by assuming a Cobb–Douglas matching function. Less obvious, the same relationship results from a vacancy free-entry condition and idiosyncratic productivity shocks. A positive aggregate productivity shock leads to more vacancy posting, a shift of the idiosyncratic selection cutoff and thereby more hiring. We calibrate a model with both mechanisms to administrative German labor market data and show that idiosyncratic productivity for new contacts is an important driver of the elasticity of the job-finding rate with respect to the market tightness. Accounting for idiosyncratic productivity can explain the observed negative time trend in estimated matching efficiency and asymmetric business cycle responses to large aggregate shocks.     

Why Are Quit Rates Lower Among Defense Contractors?

This paper presents empirical evidence of lower quit rates at small manufacturers with defense contracts and examines whether this is associated with differences in their human resource policies and organizational practices and strategies. We take advantage of an original data set to compare labor quits, workforce skills, and occupational structure between defense‐contracting and noncontracting small manufacturers in eastern Pennsylvania. We find that the remarkably large defense contractor advantage in quit rates—7 percentage points—is almost totally explained by differences in skills, operational strategies, and workforce management and training practices, suggesting a mediation effect through these HR practices. Defense‐contracting status emerges as an important overlooked variable in HRM studies.     

Labour market reform and the macroeconomic efficiency of the labour market in Australia

This paper assesses the effects of a decade and a half of labourmarket reform in Australia on labour market flexibility at themacroeconomic level. Increased labour market flexibility isinterpreted as reduced structural unemployment and enhancedefficiency of matching. We use shifts in the Beveridge Curveas a measure of changes in labour market efficiency (followingSolow, R., What is labour-market flexibility? What is it goodfor?, Keynes Lecture, British Academy, London, December, 1997).Time series analysis of unemployment, vacancies and other relevantvariables strongly suggests that changes in the efficiency oflabour market matching over the period reflect the cyclicaleffects of hysteresis rather than the effects of labour marketreform.     

Asymptotic normality in vacancies on a line

Abstract  Covering a row of hooks by hats (one hat needs two adjacent hooks) by choosing for the next hat a pair of free hooks with equal probability from the free hooks, we encounter x_n , the number of isolated hooks remaining uncovered. We prove that x_n is asymptotically normal.     

Unemployment hysteresis and the natural rate of vacancies

On the basis of macro data from 10 OECD countries, I find that the job vacancy rate outperforms the unemployment rate as a reliable measure of domestic inflationary pressure. Moreover, while the rate of unemployment affects inflation primarily through its difference, the vacancy rate operates through a level effect as well. In most countries, a unique equilibrium rate of vacancies seems to coexist with a drifting equilibrium rate of unemployment. I show that this result is consistent with existing theories of unemployment hysteresis that focus on depreciation of human capital and search activity during unemployment spells. First version received: October 1997/Final version received: June 2001     

Credit,vacancies and unemployment fluctuations

Propagation in equilibrium models of search unemployment is altered when vacancy costs require some external financing on frictional credit markets. The easing of financing constraints during an expansion as firms accumulate net worth reduces the opportunity cost for resources allocated to job creation. The dynamics of market tightness are affected by (i) a cost channel, increasing the incentive to recruit for a given benefit from a new hire, and (ii) a wage channel, whereby firms' improved bargaining position limits the upward pressure of market tightness on wages. Agency related credit frictions endogenously generate persistence in the dynamics of labor-market tightness, and have a moderate endogenous effect on amplification.