Ranking and search effort in matching

Joonbae Lee () and Hanna Wang ()
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Joonbae Lee: Korea Information Society Development Institute
Hanna Wang: Markets, Organizations and Votes in Economics (MOVE); Universitat Autonoma de Barcelona; Barcelona School of Economics

Economic Theory, 2023, vol. 75, issue 1, No 5, 113-136

Abstract: Abstract This paper studies the relationship between search effort and workers’ ranking by employers. In order to do so, we propose a matching model in which employers have common preferences over a continuum of heterogeneous workers who choose a number of applications to send out. We show that in equilibrium, the relationship is hump-shaped for sufficiently high vacancy-to-worker ratios, that is, highly-ranked and lowly-ranked workers send out fewer applications than workers of mid-range rank. This arises due to two opposing forces driving the incentives of applicants. Increasing the number of applications acts as insurance against unemployment, but is less effective when the probability of success for each application is low. This mechanism exacerbates the negative employment outcomes of low-rank workers—hence, in contrast to the market equilibrium, in the social planner’s solution, the number of applications monotonically decrease in rank.

Keywords: Simultaneous search; Search effort; Worker heterogeneity (search for similar items in EconPapers)
JEL-codes: C78 D85 J64 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s00199-021-01391-4

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