رتبه بندی از متقاضیان کار، در جستجو کار، و بیکاری مداوم

We formulate an efficiency wage model with on-the-job search where wages depend on turnover and employers may use information on whether the searching worker is employed or unemployed as a hiring criterion. We show theoretically that such ranking of job applicants by employment status raises both the level and the persistence of unemployment and numerically that the effects may be substantial. More prevalent ranking in Europe compared to the US (because of more rigid wage structures, etc.) could potentially help to explain the high and persistent unemployment in Europe.

When one compares European and US labour markets, several differences are apparent. Unemployment rates are much higher, turnover is much lower, and the adjustment back to equilibrium after a shock is much slower in Europe. While high unemployment may plausibly be blamed on unions and labour market rigidities and low turnover may be due to cultural differences, the last observation is especially intriguing. In several European countries, unemployment has remained high for a long time after it increased due to temporary cyclical shocks—a phenomenon usually called persistence or hysteresis. Adjustment costs and insider–outsider models can explain some persistence, but they can hardly generate the extreme persistence found in the data. Generous unemployment benefits may make unemployed workers search less and make them less willing to take the jobs they can get. This can explain high unemployment, but seems less plausible as an explanation of the persistence of unemployment. While it is true that unemployment persists if some of those laid off due to a negative shock are slow to return to employment, this effect becomes progressively less important as those who became unemployed at the time of the shock find jobs. So this argument cannot explain a persistence of unemployment that is much larger than the average duration of unemployment for individual workers. Thus, it seems hard to explain a very high persistence of unemployment focusing on the search behaviour of unemployed workers. 1 Why is unemployment so persistent in Europe? In this paper, we take a new look at this question, emphasizing two aspects of the labour market. The first is the importance of turnover for wage setting. The importance of voluntary turnover is well documented. Holmlund (1984) and Akerlof et al. (1988) report quit rates of around 2% per month for the US, Sweden, and Japan, and Boeri (1999) finds that worker flows from one job to another constitute around 50% of all hiring in several European economies. Pissarides and Wadsworth (1994) report that around 5% of all employed workers in Britain search for a new job, and according to Holmlund (1984), about 8% of employed workers in Sweden engage in job search during a year. Lane et al. (1996) show that worker reallocation is two to three times as great as job reallocation and labour turnover is procyclical because procyclical quits dominate countercyclical layoffs (Anderson and Meyer, 1994). McCormick (1988) shows that total separations depend strongly on the number of available vacancies. Survey evidence shows that firms care about turnover. Concerns about hiring and training costs, and loss of competence due to turnover, deter firms from wage cuts Blinder and Choi, 1990 and Campbell and Kamlani, 1997. The second starting point is the observation that unemployed workers are sometimes at a disadvantage in the competition for jobs because some employers prefer to hire already employed workers. Blau and Robins (1990) show that in the US, employed job searchers receive almost twice as many job offers as unemployed searchers with the same search effort. Winter-Ebmer (1991) finds that employment status is used as a screening device for productivity in Austria, and Bewley (1999) and Agell and Lundborg (1999) find that a substantial fraction of employers in the US and Sweden view unemployment as a signal of lower productivity. With search on the job, and costly turnover, the firm's optimal wage should depend on the probability that its employees find other jobs. If it becomes easier to find jobs, firms should raise wages to prevent costly turnover. If, in addition, unemployed workers do not compete for jobs on an equal basis with employed applicants, this makes it easier for employed workers to get the jobs they apply for, so firms should raise wages. In other words, we should expect an interaction between turnover, wage setting, and the disadvantage that unemployed workers have in the competition for jobs. More ranking of job applicants should raise wages and make unemployment higher and more persistent. To formalize this intuition, we formulate a model where a fraction of all employed workers apply for new jobs while maintaining their current jobs. Whether a person applies for a new job or not depends on the wage offered by the current employer, wages elsewhere, and a stochastic job satisfaction factor associated with the current job. When setting wages, firms take the effects on turnover into account. Ranking is introduced by assuming that only employed applicants are hired to some jobs. Ranking increases the probability that an employed worker gets the job he applies for and this makes it optimal for firms to set higher wages. The result is both higher equilibrium unemployment and slower wage adjustment following a shock. High unemployment has only a weak effect on wages because unemployed workers do not compete well with those searching on the job. Numerical simulations show that the quantitative effects of ranking may be substantial. We also use the model to interpret the different labour market outcomes in the US and Europe. Our simulations point to ranking of job applicants as a potentially important explanation of the high and persistent unemployment observed in many European labour markets. Phelps (1972), Layard and Nickell (1986), and others2 have suggested that unemployment persists because unemployed workers have difficulty competing for jobs, but there are few microeconomic formalizations of this idea. The insider bargaining model developed by Blanchard and Summers (1986), Gottfries and Horn (1987), and Drazen and Gottfries (1994) emphasizes the distinction between employed and unemployed workers, but can hardly generate the extreme amount of persistence found in the data.3 Other related papers are Huizinga and Schiantarelli (1992), Gottfries and Westermark (1998), and Pissarides (1992). Neither of these papers considers the interaction between on-the-job search, ranking, and wage setting.4 The paper that is most closely related to ours is Blanchard and Diamond (1994). They examine how wages are affected if firms rank job applicants according to the length of unemployment. Wages are determined by Nash bargaining, with the expected utility of a recently laid off worker as threat point. Their result is that ranking affects wage dynamics but has only small effects in the long run. Our analysis differs in several ways. First, we replace Nash bargaining with an efficiency wage model with turnover between jobs. Second, we focus on the relation between employed and unemployed job applicants rather than ranking according to the length of unemployment. Third, while Blanchard and Diamond examine the effects on wages of exogenous movements in employment, both wages and employment are endogenous in our model, so we can solve for employment and calculate unemployment persistence. Also, our results differ from those of Blanchard and Diamond: ranking has substantial effects not only on the dynamics, but also on the long-run levels of wages and employment. 5 In the next section, we briefly explain and motivate our definition of ranking. In Section 3, we present the model and analyze the wage, search, and employment decisions, and in Section 4, we examine the level and persistence of unemployment in a symmetric equilibrium. The quantitative effects of ranking are studied in Section 5, and in Section 6, we use the model to discuss potential explanations for the observed differences between European and the US labour markets. We end the paper with a short discussion of key assumptions in the model.

Our main purpose has been to show that ranking is a potential reason for high and persistent unemployment. If unemployed workers cannot compete well for the jobs, unemployment will have a weak effect on wages, unemployment will be high, and the return to equilibrium will be slow. Our model emphasizes the demand side of the labour market. There is excess supply in the labour market and there are no matching frictions which prevent firms from immediately hiring the workers they want; unemployed workers are ready to take any job they can get. Presumably, we could add some frictions without overturning the conclusions, but it is essential to our argument that hiring firms typically face a choice between several job applicants, some of whom are employed. We view this as a realistic feature of the model. Quits into unemployment are taken as exogenous and search is modeled in a very simple way. There are no costs of search, so unemployed workers always search and employed workers always search if they would like to change jobs. Searchers always take the jobs they are offered. Since both quits into unemployment and search by unemployed workers are taken as exogenous, unemployment benefits do not matter. With endogenous quits and search decisions by unemployed workers, there would be a role for unemployment benefits affecting unemployment.37 The model would become much more complicated because of the forward-looking aspects of quits and search.38 It is not clear how persistence would be affected, however. We did not explain why some firms prefer to hire employed job applicants. Instead, our purpose was to examine the consequences of such behaviour. The questionnaire studies quoted in the introduction suggest that ranking occurs, but to find out whether it is really important, we need more direct evidence on the hiring strategies of firms and the magnitude and effectiveness of on-the-job search. If our model of the labour market has any relevance, on-the-job search and ranking are very underresearched areas of labour economics.