Job Finding Probability Research Articles

The underemployment trap

Many college graduates are underemployed, i.e., work in occupations that do not require a college degree. We document that underemployed workers are less likely to transition to a college occupation the longer they are underemployed and that longer underemployment histories are associated with lower wages in college occupations. To explain these findings, we develop a directed search model with unobserved heterogeneity, occupation-specific human capital, and on the job search. Workers are uncertain about their suitability for college jobs and learn through search. Underemployment is generated by search and information frictions, as workers with a low expected job finding probability in college occupations self-select into underemployment. Once underemployed, workers’ college occupation-specific human capital decays. A quantitative decomposition shows that unobserved heterogeneity explains most of the duration dependence in underemployment.

Labor Market Outcomes of Unemployed Czech and Polish Workers: Catching-Up with Austria?

ABSTRACT This paper examines the micro-determinants of unemployment durations and exits in Czechia, Poland and Austria. Our hazard estimates utilize EU-SILC data and identify national specificities in which individual, household and regional characteristics affect labor market outcomes. This concerns particularly the effects of education on job-finding probability, which are nearly absent in Poland, as opposed to Austria and, even more so, Czechia. However, the key results are common across countries: Unemployed women are less employable than unemployed men, even after controlling for explanatory covariates and the disproportionally high female selection to inactivity. The analogous findings apply to the elderly and those in poor health.

Frictions and the diffusion of automation

AbstractThis paper studies the implications of business cycle frictions for the diffusion of permanent changes in automation. Incorporating task‐based production in different versions of the New Keynesian model reveals considerable short‐run implications. Price‐distorting nominal rigidities amplify the labor displacement and attenuate the productivity and welfare gains of automation during the transition to the new equilibrium. They exacerbate the falls in the labor income share, the job finding probability, the value of long‐term contracts, and labor market tightness. The inflation response follows a J‐curve. Frictions in capital supply and wage rigidities amplify the labor displacement and attenuate the productivity gains too.

Perceived returns to job search

This paper provides new evidence on workers’ perceptions of the returns to job search effort using hypothetical vignettes. This allows us to overcome limitations with survey data on realized behavior in which search effort and reservation wages may be endogenous to perceived job finding rates. The perceived job finding probability is nearly linear in hours searched and only slightly concave for most respondents. While workers are over-optimistic about the probability of receiving a job offer conditional on any search, they perceive the marginal return to additional search hours as positive but comparably low. Job seekers receiving an offer, update their perceived returns upwards, while the beliefs of unsuccessful searchers regress towards the direction of the mean. We find little evidence that novel aspects of the pandemic recession have fundamentally changed workers’ motivations for job search: that an existing job is expected to end or has unsatisfactory pay are the primary motives for on-the-job search. On the contrary, workers’ ability to do their tasks from home is not a strong predictor of job search nor a significant motive for switching occupations.

Automation, unemployment, and the role of labor market training

We provide comprehensive evidence on the consequences of automation risk on the career of unemployed workers and the mitigating role of labor market training. Using almost two decades of administrative data for Austria, we find that a higher risk of automation reduces the job finding probability; a problem which has increased over the past years. This development is associated with increasing re-employment wages and job stability. We also present new aspects of public training in times of technological progress. Provided training counteracts the negative impact of automation on the job finding probability. Its efficiency has declined over the past years, however.

Assessing the Job-Finding Probability of Older and Prime-Age Unemployed Workers

We analyse the extent and determinants of somewhat gloomy employment prospects of older unemployed populations in Austria, the Czech Republic, Poland and Slovakia. For this purpose, we explore the European Union Statistics on Income and Living Conditions over the period 2004-2014. Survival estimates suggest that older unemployed workers face lower job-finding probabilities compared to prime-age unemployed workers, while this age-based gap increases with longer unemployment spells. The results of estimating the hazard models reveal that the job-finding probability of older unemployed workers is about 20-25% lower than that of the prime-age group, even after controlling for explanatory covariates and unobserved heterogeneity. Unemployment duration appears to be the major determinant of job-finding probability within both age groups. In contrast, the impact of explanatory covariates (gender, education, household characteristics, etc.) is relatively less robust and/or uniform.

Taking off into the wind: Unemployment risk and state-Dependent government spending multipliers

We propose a model with involuntary unemployment, incomplete markets, and nominal rigidity, in which the effects of government spending are state-dependent. An increase in government purchases raises aggregate demand, tightens the labor market and reduces unemployment. This in turn lowers unemployment risk and thus precautionary saving, leading to a larger response of private consumption than in a model with perfect insurance. The output multiplier is further amplified through a composition effect, as the fraction of high-consumption households in total population increases in response to the spending shock. These features, along with the matching frictions in the labor market, generate significantly larger multipliers in recessions than in expansions. As the pool of job seekers is larger during downturns than during expansions, the concavity of the job-finding probability with respect to market tightness implies that an increase in government spending reduces unemployment risk more in the former case than in the latter, giving rise to countercyclical multipliers.

Skill accumulation in the market and at home

An evolving outside option is introduced into a stochastic directed search model with skill loss during non-employment. Using multi-spell data from the SIPP, I show that average reemployment wages are only mildly sensitive to unemployment duration while the job finding probability is highly sensitive to duration, with evidence of true duration dependence in both variables. Though untargeted, the model produces a quantitatively accurate decline in the job finding probability and starting wage, improving over a model with a fixed outside option. The addition of aggregate shocks leads to an nonlinear response of the unemployment and participation rates during and after recessions, with more severe recessions resulting in stronger hysteresis.

Employment Prospects Across Generations and the Intergenerational Persistence of Earnings

We study how employment prospects are related to the employment status of parents using monthly job histories from the UK. We find that individuals whose father is employed have a 8 percentage points higher probability of being employed, driven by a 50 percent higher job-finding probability. These differences are robust to the inclusion of individual fixed effects, and are larger at young ages and when the offspring finds a job in the father’s occupation. Instead, we do not find significant differences by the employment status of mothers. By using a simple model of labor market transitions and on-the-job human capital accumulation, we show that the estimated job-finding probability differentials can account for up to 7 percent of the intergenerational persistence of earnings.

Immigration and the Fear of Unemployment: Evidence From Individual Perceptions in Italy

We test whether natives correctly assess the effects of immigration on their own labour market opportunities. We relate self-reported job loss and job finding probabilities to the presence of foreign-born residents in a native’s neighborhood. We interpret coefficient estimates through the lens of a simple learning model that allows us to disentangle the true effect of immigration from the perception bias. Our results show that natives greatly overestimate the effects of immigrants on their likelihood of losing the current job against the lack of significant true effects; job seekers’s perceptions are instead broadly unaffected, a largely correct assessment given the failure to detect significant true effects. Overestimation of the negative effects of immigration on separation rates is very much concentrated among females, the low educated, the youths, the residents of smaller towns and employees on permanent contracts; the complementary groups appear to correctly assess that immigration has at best only modest effects. We briefly discuss the implications of these findings for the interpretation of empirical work on the labour market effects of immigration.

Anatomy of Non-Employment Risk

Abstract This paper investigates how job separation and job-finding probabilities shape the non-employment risk across ages and working group characteristics. Improving on current methods, I estimate duration models for employment and non-employment separately. I then use the results to derive the individual age profiles of conditional transitions in and out of non-employment as well as the unconditional non-employment risk profile over the whole working life. This approach allows me to apply the decomposition of changes in individual non-employment risk. To date, this type of decomposition has only been used to study aggregate non-employment dynamics. I find that differences in job separation rates across ages underlie the observed age differences in non-employment risk. When differences between working groups are under consideration, the job finding probability is just as important as the job separation probability.

Wage stickiness, offshoring and unemployment

This note investigates how the effect of offshoring on unemployment is influenced by the wage setting process. We assume staggered wage contracts in an otherwise standard search and matching model. In this setup, the contract wage depends also on expected future conditions. We show that more flexibility in the wage contracting process induces greater offshoring, a decrease in the worker’s job-finding probability and higher worker’s wage within job spells. Notably, less stickiness leads to a fall in the rents that firms can extract by producing domestically.

Taking off into the Wind: Unemployment Risk and State-Dependent Government Spending Multipliers

We propose a model with involuntary unemployment, incomplete markets, and nominal rigidity, in which the effects of government spending are state-dependent. An increase in government purchases raises aggregate demand, tightens the labor market and reduces unemployment. This in turn lowers unemployment risk and thus precautionary saving, leading to a larger response of private consumption than in a model with perfect insurance. The output multiplier is further amplified through a composition effect, as the fraction of high-consumption households in total population increases in response to the spending shock. These features, along with the matching frictions in the labor market, generate significantly larger multipliers in recessions than in expansions. As the pool of job seekers is larger during downturns than during expansions, the concavity of the job-finding probability with respect to market tightness implies that an increase in government spending reduces unemployment risk more in the former case than in the latter, giving rise to countercyclical multipliers.

Human capital and market size

AbstractThis paper studies how the size of the labour market affects workers' decisions to invest in human capital. We consider a model of mismatch where firms rank workers according to their level of skills. The matching process operating in the market has the property that the job finding probability of workers depends on market size, market tightness and their ranking. The model is consistent with several facts highlighted in empirical studies: in bigger markets the distribution of human capital is more unequal and the returns to skill are higher.

The impact of participation in job creation schemes in turbulent times

This paper analyzes the impact of participation in job creation schemes (JCSs) on job search outcomes in the context of the turbulent East German labor market in the aftermath of the German reunification. High job destruction characterized the economic environment. JCSs were heavily used in order to cushion this development. Using data from 1990–1999 and building upon the timing-of-events approach, we estimate multivariate discrete time duration models taking selection based on both observed and unobserved heterogeneity into account. Our results indicate that after initial negative effects during the typical program duration of twelve months, probably driven by reduced job search effort during participation resulting in a rearrangement of the job queue, the impact on the job finding probability becomes insignificantly positive. Additional results, however, suggest that female and highly skilled participants leave unemployment quicker than other groups, which results in highly skilled women benefiting from participation. In general, we find no significant impact on post-unemployment employment stability. Our results are robust to allowing for random treatment effects. Also taking into account endogenous participation in training programs, endogenous censoring, or multiple treatment effects do not change the results.

Do Job-to-Job Transitions Drive Wage Fluctuations Over the Business Cycle?

We investigate the importance of job-to-job (JJ) transitions for cyclical wage dynamics. By exploiting cross-state variation, we find that wage growth is tightly linked to variation in the JJ transition probability, and conditional on this, the job finding probability of the unemployed has no explanatory power. We investigate the robustness of our results to several caveats and find the result to hold. Finally, we discuss the implications of our findings for competing theories of wage dynamics.

Life cycle training and equilibrium unemployment

This paper examines life cycle vocational training investments in the context of a model with search frictions that features skill obsolescence and heterogenous agents. We shed light on some age-dependent externalities. On the one hand, this implies that firms can increase too far from retirement the selection into training programs with respect to what it would be optimal to do. On the other hand, endogenous job creation leads unemployed job finding probabilities to be too low at equilibrium, and also decreasing at the end of the working life. In turn, the latter implies that training externalities are lower for the older workers. We calibrate the model on the french economy and assess the quantitative impact of externalities on employment.

Mobility Assistance Programmes for Unemployed Workers, Job Search Behaviour and Labour Market Outcomes

The appealing idea of geographically relocating unemployed job seekers from depressed to prosperous regions and hence reducing unemployment leads to industrialised countries offering financial support to unemployed job seekers when searching for and/or accepting jobs in distant regions. In this paper, we investigate the impact of the existence of these mobility assistance programmes (MAPs) on the job search behaviour of unemployed workers and how this affects their labour market outcomes. While job search theory predicts a shift in individuals’ search effort from local to distant labour markets, consequences for other dimensions of the search behaviour, e.g. reservation wages or the overall search effort, and job-finding probabilities remain theoretically ambiguous. We use survey data on German unemployed job seekers and apply an instrumental variable approach to empirically identify the causal impact of an increased search radius, due to the availability of MAPs, on job search strategies and subsequent labour market outcomes. The results show that the existence of MAPs shifts individuals’ search effort from local to distant regions without affecting the total number of job applications. The increase in search radius causes a higher geographical mobility and hence higher employment probabilities and wages.

Measuring Heterogeneity in Job Finding Rates Among the Nonemployed Using Labor Force Status Histories

We use a novel approach to studying the heterogeneity in the job finding rates of the nonemployed by classifying the nonemployed by labor force status (LFS) histories, instead of using only one-month LFS. Job finding rates differ substantially across LFS histories: they are 25-30% among those currently out of the labor force (OLF) with recent employment, 10% among those currently OLF who have been unemployed but not employed in the previous two months, and 2% among those who have been OLF in all three previous months. This heterogeneity cannot be deduced from the one-month LFS or from one-month responses to the CPS survey questions about desire to work or recent search activity. We conclude that LFS histories is an important predictor of the nonemployed’s job finding probability, particularly for those OLF.

Job Creation Schemes in Turbulent Times

This paper analyzes the impact of job creation schemes (JCS) on job search outcomes in the context of the turbulent East German labor market in the aftermath of the German reunification. High job destruction characterized the economic environment. JCS were heavily used in order to cushion this development. Using data from 1990-1999 and building upon the timing-of-events approach, we estimate multivariate discrete time duration models taking selection based on both observed and unobserved heterogeneity into account.Our results indicate that participation in JCS increases the unemployment duration mainly due to profound locking-in effects. However, twelve months after the program start the significantly negative impact on the job finding probability vanishes. We find evidence for effect heterogeneity. Our results suggest that female and highly skilled participants leave unemployment quicker than other groups, which results in highly skilled women benefiting from participation. However, we find no significant impact on post-unemployment employment stability. Our results are robust to allowing for random treatment effects. Also taking into account endogenous participation in training programs or multiple treatment effects do not change the results.