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Rational inattention in hiring decisions
Acharya, Sushant; Wee, Shu Lin (2019-02-01)
We provide an information-based theory of matching efficiency fluctuations. Rationally inattentive firms have limited capacity to process information and cannot perfectly identify suitable applicants. During recessions, higher losses from hiring unsuitable workers cause firms to be more selective in hiring. When firms cannot obtain sufficient information about applicants, they err on the side of caution and accept fewer applicants to minimize losses from hiring unsuitable workers. Pro-cyclical acceptance rates drive a wedge between meeting and hiring rates, explaining fluctuations in matching ...
Staff Reports , Paper 878

Report
Individual and Market-Level Effects of UI Policies: Evidence from Missouri
Karahan, Fatih; Moore, Brendan; Mitman, Kurt (2019-12-01)
We develop a method to jointly measure the response of worker search effort (individual effect) and vacancy creation (market-level effect) to changes in the duration of unemployment insurance (UI) benefits. To implement this approach, we exploit an unexpected cut in UI durations in Missouri and provide quasi-experimental evidence on the effect of UI on the labor market. The data indicate that the cut in Missouri significantly increased job finding rates by both raising the search effort of unemployed workers and the availability of jobs. The latter accounts for at least a third and up to 100 ...
Staff Reports , Paper 905

Working Paper
Wage Inequality and Job Stability
Pessoa de Araujo, Ana Luisa (2017-12-05)
How much wage inequality in Brazil is caused by firing costs? To answer this question, I develop and estimate a general equilibrium search and matching model with heterogeneous layoff rates among firms. Using matched employer-employee data from Brazil, I estimate the model, and I find that it replicates the observed residual wage inequality in the data. I simulate a counterfactual removal of existing firing costs, and I find that residual wage inequality drops by 26% as measured by wage variance and by 4.4% as measured by the p95-p5 ratio among 25- to 55-year-old males working in the private ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 5

Working Paper
Interlocked Executives and Insider Board Members: An Empirical Analysis
Gayle, George-Levi; Golan, Limor; Miller, Robert A. (2015-11-27)
This paper asked the question of whether the behavior and compensation of interlocked executives and non-independent board of directors are consistent with the hypothesis of governance problem or whether this problem is mitigated by implicit and market incentives. It then analyzes the role of independent board of directors. Empirically, we cannot reject the hypothesis that executives in companies with a large number of non-independent directors on the board receive the same expected compensation as other executives. In our model, every executive has an incentive to work. Placing more of ...
Working Papers , Paper 2015-40

Working Paper
Training and Search on the Job
Lentz, Rasmus; Roys, Nicolas (2015-10-30)
The paper studies human capital accumulation over workers? careers in an on the job search setting with heterogenous firms. In renegotiation proof employment con- tracts, more productive firms provide more training. Both general and specific training induce higher wages within jobs, and with future employers, even conditional on the future employer type. Because matches do not internalize the specific capital loss from employer changes, specific human capital can be over-accumulated, more so in low type firms. While validating the Acemoglu and Pischke (1999) mechanisms, the analysis ...
Working Papers , Paper 2016-25

Working Paper
Estimating Matching Efficiency with Variable Search Effort
Hornstein, Andreas; Kudlyak, Marianna (2016-12-01)
We introduce a simple representation of endogenous search effort into the standard matching function with job-seeker heterogeneity. Using the estimated augmented matching function, we study the sources of changes in the average employment transition rate. In the standard matching function, the contribution of market tightness (matching efficiency) is increasing (decreasing) in the matching function elasticity. For our augmented matching function, search effort is procyclical for small matching elasticity and accounts for most of the transition rate volatility, with small contributions from ...
Working Paper , Paper 16-13

Working Paper
Measuring Heterogeneity in Job Finding Rates Among the Nonemployed Using Labor Force Status Histories
Lange, Fabian; Kudlyak, Marianna (2014-12-04)
We use a novel approach to studying the heterogeneity in the job finding rates of the nonemployed by classifying the nonemployed by labor force status (LFS) histories, instead of using only one-month LFS. Job finding rates differ substantially across LFS histories: they are 25-30% among those currently out of the labor force (OLF) with recent employment, 10% among those currently OLF who have been unemployed but not employed in the previous two months, and 2% among those who have been OLF in all three previous months. This heterogeneity cannot be deduced from the one-month LFS or from ...
Working Paper , Paper 14-18

Working Paper
Measuring Heterogeneity in Job Finding Rates among the Non-Employed Using Labor Force Status Histories
Lange, Fabian; Kudlyak, Marianna (2017-09-26)
We introduce a novel approach to studying heterogeneity in job finding rates by classifying the non-employed, the unemployed and those out of the labor force (OLF), according to their labor force status (LFS) histories using four-month panels in the CPS. Respondents? LFS histories outperform current-month responses to survey questions about duration and reason for unemployment, desire to work, or reasons for not searching in predicting future employment. We find that the best predictor of future employment for the non-employed is their duration since last employment. For those OLF, the ...
Working Paper Series , Paper 2017-20

Working Paper
Efficiency in Sequential Labor and Goods Markets
Wasmer, Etienne; Petrosky-Nadeau, Nicolas; Weil, Philippe (2018-09-27)
This paper studies the optimal sharing of value added between consumers, producers, and labor. We first define a constrained optimum. We then compare it with the decentralized allocation. They coincide when the price maximizes the expected marginal revenue of the firm in the goods market, an outcome of the competitive search equilibrium, and when the wage exactly offsets the congestion externality of firm entry in the labor market, which is the traditional Hosios condition. Under price and wage bargaining, this allocation is achieved under a double Hosios condition combining the logic of ...
Working Paper Series , Paper 2018-13

Working Paper
Why Is Current Unemployment So Low?
Hornstein, Andreas; Kudlyak, Marianna (2020-02-19)
Current unemployment, as of 2019Q4, is so low not because of unusually high job finding rates out of unemployment, but because of unusually low entry rates into unemployment. The unusually low entry rates, both from employment and from out of the labor force, reflect a long-run downward trend, and have lowered the unemployment rate trend over the recent decade. In fact, the difference between the current unemployment rate and unemployment rates at the two previous cyclical peaks in 2000 and 2007 is more than fully accounted for by the decline in its trend. This suggests that the current low ...
Working Paper Series , Paper 2020-05

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