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A NOTE ON THE RELATION BETWEEN SEARCH COSTS AND SEARCH DURATION FOR NEW HIRES

Published online by Cambridge University Press:  06 April 2020

Francesco Carbonero  and
Hermann Gartner
Francesco Carbonero
Affiliation:
Universita di Torino
Hermann Gartner*
Affiliation:
Institute for Employment Research (IAB) and Friedrich-Alexander-University of Erlangen-Nuremberg
*
Address correspondence to: Hermann Gartner, Institute for Employment Research, Regensburger Strasse 104, 90478Nuremberg, Germany. e-mail: hermann.gartner@iab.de.
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Abstract

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Fixed search costs, that is, costs that do not vary with search duration, can amplify the cyclical volatility of the labor market. To assess the size of fixed costs, we analyze the relation between search costs and search duration using German establishment data. An instrumental variable estimation shows no relation between search duration and search costs. We conclude that search costs are mainly fixed costs. Furthermore, we show that a search and matching model, calibrated for Germany with fixed costs close to 75%, can generate labor market volatility that is consistent with the data.

Keywords

Search CostsSearch DurationUnemployment Volatility Puzzle
Type
Articles
Information
Macroeconomic Dynamics , Volume 26 , Issue 1 , January 2022 , pp. 263 - 276
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
Copyright
© Cambridge University Press 2020

Footnotes

We are grateful to Anja Bauer, Christian Merkl, Christian Offermanns, Enzo Weber, Jeffrey Wooldridge, and Josef Zweimuller for their valuable suggestions and discussion. We would also like to thank the participants of the IAB PhD Workshop 2017, the FAU-IAB Seminar on Macroeconomics and Labor Markets, and the Annual Congress of the German Economic Association 2017 for useful comments. We are grateful to the IAB team that conducts the Vacancy Survey for the support and the opportunity to introduce questions on search costs. The survey data used are confidential but not exclusive. Access to the data is provided by the Research Data Centre of the German Federal Employment Agency. For details, see http://fdz.iab.de/en/FDZ_Establishment_Data/IAB_Job_Vacancy_Survey.aspx.

References

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