Working Paper: CEPR ID: DP16170
Authors: Niklas Engbom
Abstract: Recent micro evidence of how workers search for jobs is shown to have critical implications for the macroeconomic propagation of labor market shocks. Unemployed workers send over 10 times as many job applications in a month as their employed peers, but are less than half as likely per application to make a move. I interpret these patterns as the unemployed applying for more jobs that they are less likely to be a good fit for. During periods of high unemployment, it consequently becomes harder for firms to assert who is a good fit for the job. By raising the cost of recruiting, a short-lived adverse shock has a persistent negative impact on the job finding rate. I provide evidence that firms spend more time on recruiting when unemployment is high, quantitatively consistent with the theory.
Keywords: No keywords provided
JEL Codes: E24; E32; J63; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher unemployment rate (J64) | Increased job applications from the unemployed (J68) |
| Increased job applications from the unemployed (J68) | Increased recruitment costs for firms (M51) |
| Increased recruitment costs for firms (M51) | Lower job finding rate (J68) |
| Fluctuations in the separation rate during the Great Recession (J69) | Persistent fall in job finding rate (J64) |