Working Paper: CEPR ID: DP6440
Authors: Pieter A. Gautier; Jos Luis Moraga Gonz lez; Ronald Wolthoff
Abstract: We present a structural framework for the evaluation of public policies intended to increase job search intensity. Most of the literature defines search intensity as a scalar that influences the arrival rate of job offers; here we treat it as the number of job applications that workers send out. The wage distribution and job search intensities are simultaneously determined in market equilibrium. We structurally estimate the search cost distribution, the implied matching probabilities, the productivity of a match, and the flow value of non-labor market time; the estimates are then used to derive the socially optimal distribution of job search intensities. From a social point of view, too few workers participate in the labor market while some unemployed search too much. The low participation rate reflects a standard hold-up problem and the excess number of applications result is due to rent seeking behavior. Sizable welfare gains (15% to 20%) can be realized by simultaneously opening more vacancies and increasing participation. A modest binding minimum wage or conditioning UI benefits on applying for at least one job per period, increases welfare.
Keywords: Job Search; Labour Market Frictions; Search Costs; Structural Estimation; Wage Dispersion; Welfare
JEL Codes: C14; E24; J21; J31; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| insufficient search intensity (D83) | low labor market participation rates (J49) |
| optimal distribution of job search intensities (J68) | increase participation (I24) |
| excess job applications due to rent-seeking behavior (J68) | inefficiencies in the labor market (J49) |
| increasing vacancies and participation simultaneously (J68) | sizable welfare gains (D69) |
| search intensity (D83) | job application rates (J68) |
| job application rates (J68) | wage distributions (J31) |
| job application rates (J68) | matching rates (C52) |