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Selective hiring and welfare analysis in labor market models

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Merkl, Christian and Van Rens, Thijs (2019) Selective hiring and welfare analysis in labor market models. Labour Economics, Volume 57 . pp. 117-130. doi:10.1016/j.labeco.2019.01.008 ISSN 0927-5371.

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Official URL: https://doi.org/10.1016/j.labeco.2019.01.008

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Abstract

Firms select not only how many, but also which workers to hire. Yet, in most labor market models all workers have the same probability of being hired. We argue that selective hiring crucially affects welfare analysis. We set up a model that is isomorphic to a search model under random hiring but allows for selective hiring. With selective hiring, the positive predictions of the model change very little, but implications for welfare are different for two reasons. First, a hiring externality occurs with random but not with selective hiring. Second, the welfare costs of unemployment are much larger with selective hiring, because unemployment risk is distributed unequally across workers.

Item Type: Journal Article
Subjects: H Social Sciences > HD Industries. Land use. Labor
Divisions: Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH): Labor market, Unemployment insurance, Unemployment insurance -- Econometric models, Employees -- Selection and appointment, Employees -- Recruiting
Journal or Publication Title: Labour Economics
Publisher: Elsevier BV
ISSN: 0927-5371
Official Date: April 2019
Dates:
DateEvent
April 2019Published
30 January 2019Available
29 January 2019Accepted
Volume: Volume 57
Page Range: pp. 117-130
DOI: 10.1016/j.labeco.2019.01.008
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access
Date of first compliant deposit: 31 January 2019
Date of first compliant Open Access: 30 July 2020
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