What Drives Matching Efficiency? A Tale of Composition and Dispersion

44 Pages Posted: 18 Apr 2011

See all articles by Regis Barnichon

Regis Barnichon

Federal Reserve Bank of San Francisco

Andrew Figura

Board of Governors of the Federal Reserve System - Macroeconomic Analysis Section

Date Written: January 9, 2011

Abstract

This paper presents a framework to study movements in the matching efficiency of the labor market and highlights two observable factors affecting matching efficiency: (i) unemployment composition and (ii) dispersion in labor market conditions, the fact that tight labor markets coexist with slack ones. Using CPS micro data over 1976-2009, we find that composition is responsible for most of the movements in matching efficiency until 2006. In 2008-2009, only forty percent of an exceptionally low matching efficiency can be attributed to composition. New highly disaggregated data on vacancies and unemployment show that the unexplained decline in matching efficiency coincides with an increase in dispersion.

Keywords: Matching Function, Matching Efficiency, Composition Effect, Mismatch

JEL Classification: J6, E24, E32

Suggested Citation

Barnichon, Regis and Figura, Andrew, What Drives Matching Efficiency? A Tale of Composition and Dispersion (January 9, 2011). Available at SSRN: https://ssrn.com/abstract=1810091

Regis Barnichon (Contact Author)

Federal Reserve Bank of San Francisco ( email )

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Andrew Figura

Board of Governors of the Federal Reserve System - Macroeconomic Analysis Section ( email )

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