Abstract:
I present an equilibrium search model of the labor market with
multilateral meetings between workers and firms. Workers send
applications to one or more contracts posted by firms. The contracts
specify not only the wage rate, but also the recruitment technology
chosen by the firm, which determines the number of applicants the firm
will interview. A better technology is more costly, but serves two
purposes: it increases the probability that the firm will identify an
applicant that is qualified for the job, and it allows the firm to make
new job offers, in case earlier offers got rejected by the workers.
After characterizing the equilibrium, the model is structurally
estimated on the Employment Opportunities Pilot Projects data set. The
cost of an interview is found to equal 0.6 days of production, whereas
the cost of an interview equals 1.6 days of home production. Elimination
of the interview cost would reduce unemployment and increase output by
approximately 1 percentage point each.