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Applications and Interviews: A Structural Analysis of Two-Sided Simultaneous Search

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  • Ronald P. Wolthoff

Abstract

A large part of the literature on frictional matching in the labor market assumes bilateral meetings between workers and firms. This ignores the frictions that arise when workers and firms meet in a multilateral way and cannot coordinate their application and hiring decisions. I analyze the magnitude of these frictions. For this purpose, I present an equilibrium search model of the labor market with an endogenous number of contacts between workers and firms. Workers contact firms by applying to vacancies, whereas firms contact applicants by interviewing them. Sending more applications and interviewing more applicants are both costly activities but increase the probability to match. In equilibrium, contract dispersion arises endogenously and workers spread their applications over the different types of contracts. Estimation of the model on the Employment Opportunities Pilot Projects data set provides values for the fundamental parameters of the model, including the cost of an application, the cost of an interview, and the value of non-market time. These estimates are used to determine the loss in social surplus compared to a Walrasian world. Frictions on the worker and the firm side each cause approximately half of the 4.7% loss. There is a potential role for activating labor market policies, because I show that for the estimated parameter values welfare is improved if unemployed workers increase their search intensity.

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  • Ronald P. Wolthoff, 2010. "Applications and Interviews: A Structural Analysis of Two-Sided Simultaneous Search," Working Papers tecipa-418, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:tecipa-418
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    Cited by:

    1. Manolis Galenianos & Philipp Kircher, 2012. "On The Game‐Theoretic Foundations Of Competitive Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 1-21, February.
    2. Alonso, Ricardo, 2014. "Recruitment and selection in organizations," LSE Research Online Documents on Economics 58673, London School of Economics and Political Science, LSE Library.
    3. Lester, Benjamin & Visschers, Ludo & Wolthoff, Ronald, 2015. "Meeting technologies and optimal trading mechanisms in competitive search markets," Journal of Economic Theory, Elsevier, vol. 155(C), pages 1-15.
    4. Ronald Wolthoff, 2018. "Applications and Interviews: Firms’ Recruiting Decisions in a Frictional Labour Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(2), pages 1314-1351.
    5. Ronald Wolthoff, 2014. "It'S About Time: Implications Of The Period Length In An Equilibrium Search Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(3), pages 839-867, August.
    6. Andrew John & Ian King, 2020. "Secret Search," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(1), pages 3-35, February.
    7. Wolthoff, Ronald P., 2011. "It's About Time: Implications of the Period Length in an Equilibrium Job Search Model," IZA Discussion Papers 6002, Institute of Labor Economics (IZA).
    8. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2011. "Frictional Wage Dispersion in Search Models: A Quantitative Assessment," American Economic Review, American Economic Association, vol. 101(7), pages 2873-2898, December.
    9. Ronald Wolthoff & Ioana Marinescu, 2012. "Wages, Job Queues, and Skills," 2012 Meeting Papers 592, Society for Economic Dynamics.

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    More about this item

    Keywords

    labor; search; recruitment; frictions; efficiency;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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