Evaluating the Performance of the Search and Matching Model

By Eran Yashiv. Social Science Research Network, 2006

150 citations recorded by the source corpus.

Does the search and matching model fit aggregate U.S. labor market data? While the model has become an important tool of macroeconomic analysis, recent literature pointed to some significant failures in accounting for the data. This paper aims to answer two questions: (i) Does the model fit the data, and, if so, on what dimensions? (ii) Does the data "fit" the model, i.e. what are the data which are relevant to be explained by the model? The analysis shows that the model fits certain specifications of the data on many dimensions, though not on all. This includes capturing the high persistence and high volatility of most of the key variables, the negative co-variation of unemployment and vacancies, and the behavior of the worker job finding rate. A key role in this fit is played by the convexity of hiring costs and the stochastic properties of the separation rate. The latter is a major component of the rate discounting the future value of the job-worker match. The paper offers a workable, empirically-grounded version of the model for the analysis of aggregate U.S. labor market dynamics.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/4117ceb75b52c2fae89ae64e4e10d3d989efe09c

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In Economics and Econometrics

Citations in the corpus

Effects of a reduction of working hours on a model with job creation and job destruction (2007, background): “However, this model-type has recently come into criticism on account of its inability to explain cyclical trends in unemployment, vacancies, trends and job reallocation rate (Shimer, 2005), as well as its shortcomings in reproducing the high volatility of some of these variables and the negative cor”
Job matching and propagation (2006, background): “In related work, Yashiv (2006) evaluates a version of the matching model in which firms must incur a hiring cost upon matching with workers.”
The Cyclicality of Separation and Job Finding Rates (2008, unknown): “…jobs, more recent papers have stressed the importance of transition rates faced by individual workers.1 Furthermore, researchers have highlighted the variability of unemployment as a key measure of aggregate labor market activity.2 In this paper we assess the cyclical behavior of worker…”
More on Unemployment and Vacancy Fluctuations (2007, unknown): “There are two reasons: First, the acceptance rate falls with the job-finding rate (see equation (27)) because the more picky employed become a larger share of the applicant flow as Nagypál (2005a) has pointed out.”
Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy (2016, unknown): “See also Merz and Yashiv (2007), and Yashiv (2006).”