Working Paper: NBER ID: w28829
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: Job Search; Unemployment; Recruiting Costs; Labor Market Dynamics
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 |
|---|---|
| High unemployment (J64) | Increase in job applications submitted by unemployed workers (J68) |
| Increase in job applications submitted by unemployed workers (J68) | Lower likelihood of resulting in job offers (J79) |
| High unemployment (J64) | Increased recruiting costs for firms (M51) |
| Fluctuations in separation rate during the Great Recession (J69) | Persistent decline in job finding rates (J64) |
| Changes in separation and productivity shocks (O49) | Long-lasting effects on unemployment (J65) |
| Job search behavior and aggregate shocks (J64) | Key driver of labor market dynamics (J29) |