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A test between unemployment theories using matching data

Coles, Melvyn and Petrongolo, Barbara (2003) A test between unemployment theories using matching data. 570. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

This paper tests whether aggregate matching is consistent with unemployment being mainly due to search frictions or due to job queues. Using U.K. data and correcting for temporal aggregation bias, estimates of the random matching function are consistent with previous work in this field, but random matching is formally rejected by the data. The data instead support ‘stock-flow’ matching. Estimates find that around 40% of newly unemployed workers match quickly - they are interpreted as being on the short-side of their skill markets. The remaining workers match slowly, their re-employment rates depending statistically on the inflow of new vacancies and not on the vacancy stock. Having failed to match with existing vacancies, these workers wait for the arrival of new job vacancies. The results have important policy implications, particularly with reference to the design of optimal unemployment insurance programs.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2003 Melvyn Coles and Barbara Petrongolo
Library of Congress subject classification: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J64 - Unemployment: Models, Duration, Incidence, and Job Search
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation)
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J63 - Turnover; Vacancies; Layoffs
J - Labor and Demographic Economics > J4 - Particular Labor Markets > J41 - Contracts: Specific Human Capital, Matching Models, Efficiency Wage Models, and Internal Labor Markets
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 570
Date Deposited: 03 Mar 2008
URL: http://eprints.lse.ac.uk/3663/

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