Unraveling Over Time

72 Pages Posted: 11 Jan 2018

See all articles by Sandro Ambuehl

Sandro Ambuehl

University of Toronto - Rotman School of Management

Vivienne Groves

Stanford Graduate School of Business

Date Written: November 21, 2017

Abstract

Unraveling, the excessively early matching of future workers to employers, is a pervasive phenomenon in entry-level labor markets that leads to hiring decisions based on severely incomplete information. We provide a model of unraveling in one-to-one matching markets for prestigious positions. Its distinguishing feature is that the market operates over an extended time period during which information about potential matches arrives gradually. We find that unraveling causes potentially thick markets to spread thinly over a long time period. In equilibrium, an employers desirability is correlated neither with the time at which they hire, nor with the expected productivity of their matched worker. Unraveling thus significantly redistributes welfare among employers compared to a pairwise stable match. We study policies that manipulate the availability of information about students and show that they are effective only if they provide a sudden surge in information. Our main application is the market for U.S. federal appellate court clerks, a significant input into the efficiency of the justice system. Consistent with the model, hiring times in our dataset are spread over a period of six months and are uncorrelated with the desirability of a judge as an employer.

Suggested Citation

Ambuehl, Sandro and Groves, Vivienne, Unraveling Over Time (November 21, 2017). CESifo Working Paper Series No. 6739, Available at SSRN: https://ssrn.com/abstract=3100032 or http://dx.doi.org/10.2139/ssrn.3100032

Sandro Ambuehl (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Vivienne Groves

Stanford Graduate School of Business ( email )

PhD Program
655 Knight Way
Stanford, CA 94305
United States

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