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On the effects of ranking by unemployment duration

Author

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  • Fernandez-Blanco, Javier
  • Preugschat, Edgar
Abstract
We propose a theory based on the firm’s hiring behavior that rationalizes the observed significant decline of callback rates for an interview and exit rates from unemployment and the mild decline of reemployment wages over unemployment duration. We build a directed search model with symmetric incomplete information on worker types and non-sequential search by firms. Sorting due to firms’ testing of applicants in the past makes expected productivity fall with duration, which induces firms to rank applicants by duration. In equilibrium callback and exit rates both fall with unemployment duration. In our numerical exercise using U.S. data we show that our model can replicate quite well the observed falling patterns, with the firm’s ranking decision accounting for a sizable part.

Suggested Citation

  • Fernandez-Blanco, Javier & Preugschat, Edgar, 2017. "On the effects of ranking by unemployment duration," MPRA Paper 85310, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:85310
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. On the effects of ranking by unemployment duration
      by Christian Zimmermann in NEP-DGE blog on 2018-05-11 18:53:45

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    3. Merkl, Christian & van Rens, Thijs, 2019. "Selective hiring and welfare analysis in labor market models," Labour Economics, Elsevier, vol. 57(C), pages 117-130.
    4. Meier, Mario & Obermeier, Tim, 2017. "Employer Screening, Unemployment Stigma and Optimal Unemployment Insurance," EconStor Preprints 148303, ZBW - Leibniz Information Centre for Economics.
    5. Ioannis Kospentaris, 2021. "Unobserved Heterogeneity and Skill Loss in a Structural Model of Duration Dependence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 39, pages 280-303, January.
    6. Flemming, Jean, 2020. "Skill accumulation in the market and at home," Journal of Economic Theory, Elsevier, vol. 189(C).
    7. Shuaizhang Feng & Lars Lefgren & Brennan C. Platt & Bingyong Zheng, 2019. "Job search under asymmetric information: endogenous wage dispersion and unemployment stigma," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(4), pages 817-851, June.
    8. Pizzo, Alessandra & Villena-Roldán, Benjamin, 2024. "Labor markets, wage Inequality, and hiring selection," MPRA Paper 120281, University Library of Munich, Germany.
    9. Julio J. Rotemberg, 2017. "Group Learning, Wage Dispersion and Non-stationary Offers," Economica, London School of Economics and Political Science, vol. 84(335), pages 365-392, July.
    10. Anikó Bíró & Cecília Hornok & Judit Krekó & Dániel Prinz & Ágota Scharle, 2023. "The labor market effects of disability benefit loss," IFS Working Papers W23/27, Institute for Fiscal Studies.
    11. Ismail Baydur & Jianhuan Xu, 2024. "Statistical Discrimination And Duration Dependence In A Semistructural Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(3), pages 1357-1386, August.
    12. Ferdie Angelo A. Perante & Wilma A. Perante & Wilferd Jude A. Perante, 2023. "Unemployment Before–Amidst COVID-19: Shifts in the Predictive Factors of the Number of Weeks Spent Looking for Work," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(9), pages 2007-2017, September.
    13. Pedro Gomes & Javier Fernandez-Blanco, 2013. "On the Composition Effects on the Labor Market Outcomes," 2013 Meeting Papers 561, Society for Economic Dynamics.
    14. Pedro Gomes, 2015. "The importance of frequency in estimating labour market transition rates," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-10, December.
    15. Zamanzadeh, Akbar & Chan, Marc K. & Ehsani, Mohammad Ali & Ganjali, Mojtaba, 2020. "Unemployment duration, Fiscal and monetary policies, and the output gap: How do the quantile relationships look like?," Economic Modelling, Elsevier, vol. 91(C), pages 613-632.

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    More about this item

    Keywords

    Ranking Sorting Directed search;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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