A Test between Unemployment Theories Using Matching Data

Melvyn Coles and Barbara Petrongolo

No 723, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 50% 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.

Keywords: temporal aggregation; unemployment; matching (search for similar items in EconPapers)
JEL-codes: E24 J41 J63 J64 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2003-02
New Economics Papers: this item is included in nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Published - published in: International Economic Review, 2008, 49 (4), 1113-1141

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Related works:
Working Paper: A Test Between Unemployment Theories Using Matching Data (2003)
Working Paper: A test between unemployment theories using matching data (2003)
Working Paper: A Test Between Unemployment Theories Using Matching Data (2002)
Working Paper: A test between unemployment theories using matching data (2002)
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