Revisiting the matching function

Britta Kohlbrecher, Christian Merkl and Daniela Nordmeier

No 1909, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Many labor market models use both idiosyncratic productivity and a vacancy free entry condition. This paper shows that these two features combined generate an equilibrium comovement between matches on the one hand and unemployment and vacancies on the other hand, which is observationally equivalent to a constant returns Cobb-Douglas function commonly used to model match formation. We use German administrative labor market data to show that the matching function correlation solely based on idiosyncratic productivity and free entry is very close to the empirical matching function. Consequently, we argue that standard matching function estimations are seriously biased if idiosyncratic productivity plays a role for match formation. In this case, they are not suitable for the calibration of labor market models.

Keywords: matching function; idiosyncratic productivity; job creation; vacancies (search for similar items in EconPapers)
JEL-codes: E24 E32 J63 J64 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Journal Article: Revisiting the matching function (2016)
Working Paper: Revisiting the Matching Function (2016)
Working Paper: Revisiting the matching function (2014)
Working Paper: Revisiting the Matching Function (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1909

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