Job Applications and Labor Market Flows

RePEc Short ID: pbi318
ORCID iD: 0000-0001-7323-1932

Birinci, Serdar; See, Kurt; Wee, Shu Lin

doi:10.20955/wp.2020.023

Working Paper Revision

Job Applications and Labor Market Flows

Abstract: Improvements in search technology have led to an increase in worker applications over time. Concomitantly, unemployment inflow rates have declined sharply, with no long-run change in job-finding rates. To explain these trends, we introduce a search model with multiple applications and costly information acquisition. When workers send more applications, the model predicts that firms invest more in finding good matches, leading to fewer separations, while workers become choosier about which offers they accept, mitigating the rise in job-finding rates. Quantitatively, the model replicates the empirical trends in unemployment flows both in the aggregate and across groups. To validate our model's mechanisms, we present new facts on the variation in job offers, acceptance rates, and reservation wages over time. Importantly, it is the model's ability to reproduce these empirical changes that enables it to generate the observed trends in unemployment flows.

Keywords: Costly Information; Unemployment; Multiple Applications; Inflows; Outflows;

JEL Classification: E24; J63; J64;

https://doi.org/10.20955/wp.2020.023

Status: Published in The Review of Economic Studies