DP966 Cross-Section Estimation of the Matching Function: Evidence from England and Wales

Author(s): Melvyn G Coles, Eric Smith
Publication Date: May 1994
Keyword(s): Cross-Section Estimation, Matching, Returns to Scale
JEL(s): J64
Programme Areas: Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=966

This paper analyses how the levels of unemployment and vacancies affect the rate at which unemployed workers find employment -- the worker-firm `matching function'. In particular we test the robustness of previous empirical work by checking whether we obtain the same estimated function using cross-section data rather than aggregate time-series data. We find strong evidence of constant returns to scale similar to previous work. We also find larger cities have higher wages. This provides indirect support for increasing returns, but where those returns are taken in the form of better-quality matches.