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Ranking and Search Effort in Matching

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  • Joonbae Lee
  • Hanna Wang

Abstract

This paper studies the relationship between search effort and workers' ranking by employers. We propose a matching model in which employers' common preferences over a continuum of heterogeneous workers affect the number of applications each worker sends out. We show that in equilibrium, the relationship is hump-shaped for sufficiently high vacancy-to-worker ratios, that is highly-ranked and lowly-ranked workers send out fewer applications than workers of mid-range rank. This arises due to two opposing forces driving the incentive of applicants. Increasing the number of applications acts as insurance against unemployment, but is less effective when the probability of success for each application is low. This mechanism exacerbates the negative employment outcomes of low-rank workers. We discuss comparative statics with regards to the size of the vacancy pool and application cost, and show that, in contrast to the market equilibrium, in the solution of the social planner the number of applications are monotonously decreasing in rank.

Suggested Citation

  • Joonbae Lee & Hanna Wang, 2021. "Ranking and Search Effort in Matching," Working Papers 1242, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:1242
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
    2. Galenianos, Manolis & Kircher, Philipp, 2009. "Directed search with multiple job applications," Journal of Economic Theory, Elsevier, vol. 144(2), pages 445-471, March.
    3. Andreas Hornstein & Marianna Kudlyak, 2015. "Estimating Matching Efficiency with Variable Search Effort," Working Paper Series 2016-24, Federal Reserve Bank of San Francisco.
    4. Albrecht, James & Tan, Serene & Gautier, Pieter & Vroman, Susan, 2004. "Matching with multiple applications revisited," Economics Letters, Elsevier, vol. 84(3), pages 311-314, September.
    5. Donald Boyd & Hamilton Lankford & Susanna Loeb & James Wyckoff, 2005. "Explaining the Short Careers of High-Achieving Teachers in Schools with Low-Performing Students," American Economic Review, American Economic Association, vol. 95(2), pages 166-171, May.
    6. Chade, Hector, 2001. "Two-sided search and perfect segregation with fixed search costs," Mathematical Social Sciences, Elsevier, vol. 42(1), pages 31-51, July.
    7. Eduardo M. Azevedo & Jacob D. Leshno, 2016. "A Supply and Demand Framework for Two-Sided Matching Markets," Journal of Political Economy, University of Chicago Press, vol. 124(5), pages 1235-1268.
    8. Robert Shimer, 2005. "The Assignment of Workers to Jobs in an Economy with Coordination Frictions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 996-1025, October.
    9. Shouyong Shi, 2002. "A Directed Search Model of Inequality with Heterogeneous Skills and Skill-Biased Technology," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(2), pages 467-491.
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    Cited by:

    1. Matthias Birkner & Niklas Scheuer & Klaus Wälde, 2023. "The dynamics of Pareto distributed wealth in a small open economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(2), pages 607-644, August.
    2. Lee, Joonbae, 2022. "Role of common preferences in the outcome of many-to-many matching," Economics Letters, Elsevier, vol. 217(C).

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    More about this item

    Keywords

    simultaneous search; search effort; worker heterogeneity;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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