A Note on the Relation Between Search Costs and Search Duration for New Hires

Abstract

Fixed search costs, that is, costs that do not vary with search duration, can amplify the cyclical volatility of the labor market. To assess the size of fixed costs, we analyze the relation between search costs and search duration using German establishment data. An instrumental variable estimation shows no relation between search duration and search costs. We conclude that search costs are mainly fixed costs. Furthermore, we show that a search and matching model, calibrated for Germany with fixed costs close to 75%, can generate labor market volatility that is consistent with the data.

Flexible Use of the Large-Scale Short-Time Work Scheme in Germany during the Pandemic: Dynamic Labour Demand Models Estimation with High-Frequency Establishment Data

“…Assuming, as Addison et al (2014) do, that adjustment costs do not rise disproportionately, the value suggests that about 22.5% of establishments adjust their permanent employment completely within two survey waves, which is approximately one month. This would be significantly faster than estimates for Germany based on annually repeated surveys (e.g., Jung 2014) and in line with results that can be obtained for the duration of the staffing process in Germany from the IAB Job Vacancy Survey (Carbonero and Gartner 2022). In addition to the lagged endogenous variable, several dummy variables are also statistically significant.…”

Job Ladder and Wealth Dynamics in General Equilibrium

“…Capital depreciates at 1.5% per quarter. Given that average (quarterly) earnings are normalized to one (see below), we set the cost of a vacant job to k = 0.17 which corresponds to average recruiting costs of around 1,600 Euros as reported by Carbonero and Gartner (2022) on the basis of the German Job Vacancy Survey. We estimate the initial distribution of net wealth from the SOEP based on households aged 24-26 years.…”

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