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Returns to scale in a matching model: evidence from disaggregated panel data

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  • Aki Kangasharju
  • Jaakko Pehkonen
  • Sari Pekkala

Abstract

The returns to scale in the matching function play an important role in models with endogenous search effort. Due to positive externalities, increasing returns to scale in matching can support high or low activity equilibrium in the labour market. In this study, we examine this issue using panel data from Finnish employment offices. The study finds that the results from the Cobb-Douglas and translog specification are qualitatively different. The CD specification of the matching function exhibits constant returns to scale. The translog specification, in turn, exhibits increasing returns to scale. The elasticity estimate for returns, using the preferred specification and minimum and maximum sample values for job seekers and vacancies, fall in the range of 1.1 to 1.6.

Suggested Citation

  • Aki Kangasharju & Jaakko Pehkonen & Sari Pekkala, 2005. "Returns to scale in a matching model: evidence from disaggregated panel data," Applied Economics, Taylor & Francis Journals, vol. 37(1), pages 115-118.
    • Handle: RePEc:taf:applec:v:37:y:2005:i:1:p:115-118
    DOI: 10.1080/00036840412331313530
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    References listed on IDEAS

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    1. Daniel Munich & Jan Svejnar & Katherine Terrell, 1998. "Worker-Firm Matching and Unemployment in Transition to a Market Economy: (Why) Were the Czechs More Successful than Others?," William Davidson Institute Working Papers Series 107, William Davidson Institute at the University of Michigan.
    2. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    3. Coles, Melvyn G. & Petrongolo, Barbara, 2002. "A test between unemployment theories using matching data," LSE Research Online Documents on Economics 5329, London School of Economics and Political Science, LSE Library.
    4. Broersma, Lourens & Van Ours, Jan C., 1999. "Job searchers, job matches and the elasticity of matching," Labour Economics, Elsevier, vol. 6(1), pages 77-93, March.
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    6. van Ours, J. C. & Burdett, K. & Coles, M., 1994. "Temporal Aggregation Bias in Stock-Flow Models," Other publications TiSEM 993a7da0-0d67-4900-b529-6, Tilburg University, School of Economics and Management.
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    Cited by:

    1. Angela, Cipollone & Paolo E., Giordani, 2016. "When Entrepreneurs Meet Financiers: Evidence from the Business Angel Market," MPRA Paper 69545, University Library of Munich, Germany.
    2. Stops Michael & Mazzoni Thomas, 2010. "Matchingprozesse auf beruflichen Teilarbeitsmärkten / Job Matching on Occupational Labour Markets," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(3), pages 287-312, June.
    3. Gottfries, Nils & Stadin, Karolina, 2016. "The Matching Process:Search Or Mismatch?," Working Paper Series 2016:14, Uppsala University, Department of Economics.
    4. Michael Stops, 2014. "Job matching across occupational labour markets," Oxford Economic Papers, Oxford University Press, vol. 66(4), pages 940-958.
    5. Peter A. Diamond & Ayşegül Şahin, 2016. "Disaggregating the Matching Function," NBER Working Papers 22965, National Bureau of Economic Research, Inc.
    6. Wozniak, Marcin, 2021. "Spatial matching on the urban labor market: estimates with unique micro data," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 55(55), pages 1-.11.
    7. Okudaira, Hiroko, 2020. "Regulating the timing of job search: evidence from the labor market for new college graduates," Labour Economics, Elsevier, vol. 67(C).
    8. Sanna‐Mari Hynninen & Aki Kangasharju & Jaakko Pehkonen, 2009. "Matching Inefficiencies, Regional Disparities, and Unemployment," LABOUR, CEIS, vol. 23(3), pages 481-506, September.
    9. Stops, Michael, 2011. "Job Matching on non-separated Occupational Labour Markets," VfS Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 49161, Verein für Socialpolitik / German Economic Association.
    10. Cipollone, Angela & Giordani, Paolo E., 2019. "Entrepreneurs meet financiers: Evidence from the business angel market," Journal of Business Venturing, Elsevier, vol. 34(5), pages 1-1.
    11. Wozniak, Marcin, 2021. "Spatial matching on the urban labor market: estimates with unique micro data," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 55, pages 1-11.
    12. Kangasharju, Aki & Hynninen, Sanna-Mari & Pehkonen, Jaakko, 2006. "Regional Matching Frictions and Aggregate Unemployment," Discussion Papers 383, VATT Institute for Economic Research.
    13. Godfrey Keller & Kevin Roberts & Margaret Stevens, 2007. "Unemployment, Participation and Market Size," Economics Series Working Papers 362, University of Oxford, Department of Economics.
    14. Sanna-Mari Hynninen, 2005. "Labour market status of job seekers in regional matching processes," ERSA conference papers ersa05p499, European Regional Science Association.
    15. Marcin Wozniak, 2021. "Spatial matching on the urban labor market: estimates with unique micro data," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 55(1), pages 1-17, December.
    16. Razzak, Weshah, 2008. "On The dynamic of search, matching and productivity in New Zealand and Australia," MPRA Paper 8262, University Library of Munich, Germany.
    17. repec:iab:iabjlr:v:55:i::p:art.11 is not listed on IDEAS
    18. Sanna-Mari Ahtonen, 2004. "Matching across space: evidence from Finland," ERSA conference papers ersa04p205, European Regional Science Association.

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