Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/21397
Authors: 
Sunde, Uwe
Year of Publication: 
2002
Series/Report no.: 
IZA Discussion paper series 520
Abstract: 
This paper develops a model of equilibrium unemployment with (unobservable) endogenous on-the-job search and (partly unobservable) endogenous search behavior by firms. The model allows to analyze crowding-out of unemployed job seekers by endogenous on-the job search of employees, and the interaction of job search behavior and vacancy posting policies of firms. Moreover, it is shown that the neglect of endogenous but not observable behavior in the empirical literature on labor matching leads to systematically biased estimates of the matching elasticities, posing a caveat on the results of previous studies testing for constant returns of the matching function. The theoretical model presented allows to predict the direction of the bias. We propose a correction for the estimates of empirical matching functions that leads to unbiased estimates of the matching elasticities. The empirical implications of the theoretical model are tested and confirmed using German administrative data, and unbiased estimates of matching elasticities are presented.
Subjects: 
empirical matching functions
job competition
on-the-job search
hiring competition
search channels
omitted variable bias
JEL: 
J64
J41
J63
J60
C23
Document Type: 
Working Paper

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