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Federal Reserve Bank of San Francisco
Working Paper Series
Generalized Matching Functions and Resource Utilization Indices for the Labor Market
Andreas Hornstein
Marianna Kudlyak
Abstract

In the U.S. labor market unemployed individuals that are actively looking for work are more than three times as likely to become employed as those individuals that are not actively looking for work and are considered to be out of the labor force (OLF). Yet, on average, every month twice as many people make the transition from OLF to employment than do from unemployment. Based on these observations we have argued in Hornstein, Kudlyak, and Lange (2014) for an alternative measure of resource utilization in the labor market, a non-employment index, which is more comprehensive than the standard unemployment rate. In this article we show how the NEI fits into recent extensions of the matching function which is a standard macroeconomic approach to model labor markets with frictions, how it affects estimates of the extent of labor market frictions, and how these frictions have changed in the Great Recession.


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Andreas Hornstein & Marianna Kudlyak, Generalized Matching Functions and Resource Utilization Indices for the Labor Market, Federal Reserve Bank of San Francisco, Working Paper Series 2017-5, 15 Feb 2017.
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Note: This paper is forthcoming in the Federal Reserve Bank of Richmond Economic Quarterly.
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DOI: 10.24148/wp2017-05
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