The Labour Market Matching Efficiency in Australian Regions

Kelly, Sean;Grainger, Daniel;Sun, Sizhong;Welters, Riccardo

Abstract

We advance the literature on estimating job matching functions in two ways. Scholars acknowledge that past matching efficiency affects current job search and posting behaviour (i.e., tightness is endogenous), however, so far ignore that forecast (lead) matching efficiency may also affect tightness. We specify a model that accommodates lagged and lead efficiency to address both endogeneity channels. Scholars also acknowledge that matching efficiency may be region specific, however, a test to formally evaluate matching heterogeneity is missing, for which we develop a χ^2-distributed test statistic. Using regional Australian data, we (a) demonstrate that lead matching efficiency indeed endogenizes labour market tightness and (b) confirm matching heterogeneity in the Australian regional context. Both innovations have policy relevance, and their application will improve matching efficiency estimates and provide policymakers with a tool to test whether region-specific labour market policy is warranted.

Journal

Economica

Publication Name

Economica

Volume

ISBN/ISSN

1468-0335

Edition

N/A

Issue

369

Pages Count

Location

N/A

Publisher

Wiley-Blackwell

Publisher Url

N/A

Publisher Location

N/A

Publish Date

N/A

Url

N/A

Date

N/A

EISSN

N/A

DOI

10.1111/ecca.70009