Revisiting the matching function

Journal article

Publication Details

Author(s): Kohlbrecher B, Merkl C, Nordmeier D
Journal: Journal of Economic Dynamics & Control
Publication year: 2016
Volume: 69
Pages range: 350-374
ISSN: 0165-1889
Language: English


There is strong empirical evidence for Cobb–Douglas matching functions. We show in this paper that this widely found relation between matches on the one hand and unemployment and vacancies on the other hand can be the result of different underlying mechanisms. Obviously, it can be generated by assuming a Cobb–Douglas matching function. Less obvious, the same relationship results from a vacancy free-entry condition and idiosyncratic productivity shocks. A positive aggregate productivity shock leads to more vacancy posting, a shift of the idiosyncratic selection cutoff and thereby more hiring. We calibrate a model with both mechanisms to administrative German labor market data and show that idiosyncratic productivity for new contacts is an important driver of the elasticity of the job-finding rate with respect to the market tightness. Accounting for idiosyncratic productivity can explain the observed negative time trend in estimated matching efficiency and asymmetric business cycle responses to large aggregate shocks.

FAU Authors / FAU Editors

Kohlbrecher, Britta Dr.
Lehrstuhl für Volkswirtschaftslehre, insbesondere Makroökonomik
Merkl, Christian Prof. Dr.
Lehrstuhl für Volkswirtschaftslehre, insbesondere Makroökonomik

How to cite

Kohlbrecher, B., Merkl, C., & Nordmeier, D. (2016). Revisiting the matching function. Journal of Economic Dynamics & Control, 69, 350-374.

Kohlbrecher, Britta, Christian Merkl, and Daniela Nordmeier. "Revisiting the matching function." Journal of Economic Dynamics & Control 69 (2016): 350-374.


Last updated on 2018-19-04 at 03:42