The Job Search Intensity Supply Curve: How Labor Market Conditions Affect Job Search Effort

Authors

Jeremy Schwartz, Loyola University Maryland

Publication Date

8-21-2014

Series

Upjohn Institute working paper ; 14-215

DOI

10.17848/wp14-215

Abstract

During the Great Recession of 2007, unemployment reached nearly 10 percent and the ratio of unemployment to open positions (as measured by the Help Wanted OnLine Index) more than tripled. The weak labor market prompted an unprecedented extension in the length of time in which a claimant can collect unemployment insurance (UI) to 99 weeks, at an expense to date of $226.4 billion. While many claim that extending UI during a recession will reduce search intensity, the effect of weak labor market conditions on search remains a mystery. As a result, policymakers are in the dark as to whether UI extensions reduce already low search effort during recessions or perhaps decrease excessive search, which causes congestion in the labor market. At the same time, modelers of the labor market have little empirical justification for their assumptions on how search intensity changes over the business cycle. This paper develops a search model where the impact of macro labor market conditions on a worker’s search effort depends on whether these two factors are substitutes or complements in the job search process. Parameter estimates of the structural model using a sample of unemployment spells from the National Longitudinal Survey of Youth 1997 indicate that macro labor market conditions and individual search effort are complements and move together over the business cycle. The estimation also reveals that more risk-averse and less wealthy individuals exhibit less search effort.

Issue Date

August 20, 2014

Sponsorship

W.E. Upjohn Institute for Employment Research Early Career Research Award 12-137-13

Subject Areas

LABOR MARKET ISSUES; Job security and unemployment dynamics; Job search; UNEMPLOYMENT, DISABILITY, and INCOME SUPPORT PROGRAMS; Unemployment insurance; Benefits and duration