Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263319 
Year of Publication: 
2017
Citation: 
[Journal:] Oxford Bulletin of Economics and Statistics [ISSN:] 1468-0084 [Volume:] 79 [Issue:] 1 [Publisher:] Wiley [Place:] Oxford [Year:] 2017 [Pages:] 101-123
Publisher: 
Wiley, Oxford
Abstract: 
This paper investigates the role of structural imbalance between job seekers and job openings for the forecasting performance of a labour market matching function. Starting from a Cobb-Douglas matching function with constant returns to scale (CRS) in each frictional micro market shows that on the aggregate level, a measure of mismatch is a crucial ingredient of the matching function and hence should not be ignored for forecasting hiring figures. Consequently, we allow the matching process to depend on the level of regional, qualificatory and occupational mismatch between unemployed and vacancies. In pseudo out-of-sample tests that account for the nested model environment, we find that forecasting models enhanced by a measure of mismatch significantly outperform their benchmark counterparts for all forecast horizons ranging between one month and a year. This is especially pronounced during and in the aftermath of the Great Recession where a low level of mismatch improved the possibility of unemployed to find a job again. The results show that imposing CRS helps improve forecast accuracy compared to unrestricted models.
Subjects: 
Matching Function
Mismatch Indicators
Forecast Evaluation
JEL: 
C22
C52
C53
C78
E24
E27
Published Version’s DOI: 
Document Type: 
Article
Document Version: 
Accepted Manuscript (Postprint)

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