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A test between unemployment theories using matching data

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  • Coles, Melvyn
  • Petrongolo, Barbara

Abstract

This paper tests whether aggregate matching is consistent with unemployment being mainly due to search frictions or due to job queues. Using U.K. data and correcting for temporal aggregation bias, estimates of the random matching function are consistent with previous work in this field, but random matching is formally rejected by the data. The data instead support ‘stock-flow’ matching. Estimates find that around 40% of newly unemployed workers match quickly - they are interpreted as being on the short-side of their skill markets. The remaining workers match slowly, their re-employment rates depending statistically on the inflow of new vacancies and not on the vacancy stock. Having failed to match with existing vacancies, these workers wait for the arrival of new job vacancies. The results have important policy implications, particularly with reference to the design of optimal unemployment insurance programs.

Suggested Citation

  • Coles, Melvyn & Petrongolo, Barbara, 2003. "A test between unemployment theories using matching data," LSE Research Online Documents on Economics 3663, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:3663
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    References listed on IDEAS

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    More about this item

    Keywords

    Matching; Unemployment; Temporal aggregation.;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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