Working Paper: CEPR ID: DP8471
Authors: Daniel Borowczyk-Martins; Grégory Jolivet; Fabien Postel-Vinay
Abstract: We show that equilibrium matching models imply that standard estimates of the matching function elasticities are exposed to an endogeneity bias, which arises from the search behavior of agents on either side of the market. We offer an estimation method which, under certain assumptions, is immune from that bias. Application of our method to the estimation of a basic version of the matching function using aggregate U.S. data from the Job Openings and Labor Turnover Survey (JOLTS) suggests that the bias is quantitatively important.
Keywords: Job Finding; Matching Function Estimation; Unemployment; Vacancies
JEL Codes: J63; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| random shocks to matching efficiency (C62) | job vacancies (J63) |
| random shocks to matching efficiency (C62) | number of matches formed (C78) |
| job vacancies (J63) | matching function elasticities (C59) |
| matching efficiency (C52) | job vacancies (J63) |
| job vacancies (J63) | number of matches formed (C78) |
| search behavior of agents (D83) | labor market tightness (J20) |
| search behavior of agents (D83) | job finding rate (J68) |
| labor market tightness (J20) | job finding rate (J68) |
| endogeneity of job vacancies (J69) | bias in OLS estimates (C51) |