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The Matching Function: a Unified Look into the Black Box

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  • Angelis, Georgios
  • Bramoullé, Yann
Abstract
In this paper, we use tools from network theory to trace the properties of the matching function to the structure of granular connections between applicants and firms. We link seemingly disparate parts of the literature and recover existing functional forms as special cases. Our overarching message is that structure counts. For rich structures, captured by non-random networks, the matching function depends on whole sets rather than just the sizes of the two sides of the market. For less rich—random network—structures it depends on the sizes of the two sides and a few structural parameters. Structures characterized by greater asymmetries reduce the matching function’s efficacy, while denser structures can have ambiguous effects on it. For the special case of the Erdos-Renyi network, we show that the way the network varies with the sizes of the two sides of the market determines if the matching function exhibits constant returns to scale, or even if it is of a specific functional form, such as CES.

Suggested Citation

  • Angelis, Georgios & Bramoullé, Yann, 2023. "The Matching Function: a Unified Look into the Black Box," CEPR Discussion Papers 18318, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18318
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    References listed on IDEAS

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    1. Benedikt Herz & Thijs van Rens, 2020. "Accounting for Mismatch Unemployment," Journal of the European Economic Association, European Economic Association, vol. 18(4), pages 1619-1654.
    2. Lange, Fabian & Papageorgiou, Theodore, 2020. "Beyond Cobb-Douglas: Flexibly Estimating Matching Functions with Unobserved Matching Efficiency," IZA Discussion Papers 13177, Institute of Labor Economics (IZA).
    3. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, April.
    4. Robert Shimer, 2005. "The Assignment of Workers to Jobs in an Economy with Coordination Frictions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 996-1025, October.
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