Recruitment in Recovery. Mark Sanders Utrecht School of Economics, Netherlands and Riccardo Welters University of Newcastle, Australia. Motivation. Outflow from unemployment fails to increase in proportion to the hiring rate. Why? Self Selection/Sorting Signaling Recruiting Strategies
Utrecht School of Economics, Netherlands
University of Newcastle, Australia
In tight labor markets unemployed job searchers increase total search effort.
The allocation of search effort between channels depends on firm recruitment channel switch (into channel 2) and the on-the-job search response (out of channel 2).
The effect of tightness on outflow is ambiguous.
The model works so our logic is sound.
The data supports the key assumptions.
…to prove our point:
We need to probe the data further
Control for institutional change
Improve our tightness (per channel) measure
Run an ordered logit on all possible channels
Bring in search intensity
Iff we can prove our point:
Unemployed job searchers require assistance in tightening labor markets to compete in the open channel
So that ALM-policy effort should be pro-cyclical.
Matching in closed (1) and open (2) channel:
Flow probability of filling a vacancy through (1) and (2):
Job finding flow probability for unemployed JS:
Job finding flow probability for employed JS:
Firms choose search effort per channel:
First Order Condition on search effort:
sf1,2 is negative in channel specific flow cost and
the marginal effect on the probability of filling the
vacancy through that channel and positive
in interest rate and job value as well as, obviously,
the probability of filling the vacancy through that channel.
Firms open vacancies in both channels:
Together with the FOC his implies:
As the marginal probability is decreasing in the vacancy rate:
Higher job value increases number of vacancies in both channels.
Higher costs will reduce vacancies in that channel.
Value of a filled vacancy (job):
Allows for expressing optimal search effort per channel in
aggregate variables only. Effort in a channel depends positively
on the effort of job searchers in that channel. Tightening markets
Will cause firms to shift towards the open channel.
Unemployed Job Searchers:
Which implies that unemployed job searchers set effort
such that marginal probabilities equalize. This implies
they switch to channel 1 when employed job searchers
search effort increases in channel 2.
Employed Job Searchers:
Setting effort to maximize yields:
Which implies that employed job searchers set effort
in response to a wage mark-up and reduce effort when
unemployment or the search effort of unemployed in
channel 2 increases.
Solve for equilibrium wage:
And closes the model.
Table 1: Job search decision employees, pooled 1992-2000, clustered1
Table 2: Recruitment intensity in open channels, 2001
Table 3: Recruitment intensity in public channels, 2001
Table 4: Recruitment preference for public channel, 2001
Table 5: Channel choice unemployed job searcher, pooled 1994-2000, clustered1