Arbeitspapier

Revisiting the matching function

Many labor market models use both idiosyncratic productivity and a vacancy free entry condition. This paper shows that these two features combined generate an equilibrium comovement between matches on the one hand and unemployment and vacancies on the other hand, which is observationally equivalent to a constant return Cobb-Douglas function commonly used to model match formation. We use German administrative labor market data to show that the matching function correlation solely based on idiosyncratic productivity and free entry is very close to the empirical matching function. Consequently, we argue that standard matching function estimations are seriously biased if idiosyncratic productivity plays a role for match formation. In this case, they are not suitable for the calibration of labor market models.

Language
Englisch

Bibliographic citation
Series: IAB-Discussion Paper ; No. 5/2014

Classification
Wirtschaft
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Business Fluctuations; Cycles
Labor Turnover; Vacancies; Layoffs
Unemployment: Models, Duration, Incidence, and Job Search
Subject
matching function
idiosyncratic productivity
job creation
vacancies

Event
Geistige Schöpfung
(who)
Kohlbrecher, Britta
Merkl, Christian
Nordmeier, Daniela
Event
Veröffentlichung
(who)
Institut für Arbeitsmarkt- und Berufsforschung (IAB)
(where)
Nürnberg
(when)
2014

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Kohlbrecher, Britta
  • Merkl, Christian
  • Nordmeier, Daniela
  • Institut für Arbeitsmarkt- und Berufsforschung (IAB)

Time of origin

  • 2014

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