| In response to a continuously changing economic environment workers are reallocated across jobs, firms and industries. This reallocation process does not occur instantaneously, however, but involves search and matching frictions which can incur important costs that are born by workers and firms. This dissertation contributes to the understanding of this process from three distinct perspectives. The first part investigates the quality of worker reallocation measures, such as job creation and destruction, based on administrative data, and in particular the extent to which establishment entry and exit is responsible for worker reallocation. A common problem in such datasets is measurement error in firm identifiers, which may severely bias reallocation measures. The chapter corrects for this measurement error by using information on individual worker flows to correct for spurious changes in the establishment identifier. It shows that measurement error for job creation and destruction can be quite large, but that it is quite feasible to provide corrected measures which provide a much closer fit with the business cycle. The second part investigates search frictions from the firm perspective. In particular the chapter shows that new firms, which typically have very high employment growth rates, are substantially affected by search frictions and in response pay higher wages to attract workers and choose a slower growth path to their optimal employment size, compared to a world without frictions. The third part turns to labor market search from the perspective of unemployed workers. Of particular concern has been the role of institutions, such as unemployment insurance (UI), for the search process. Ex ante UI could improve the matching process, but it may also provide significant disincentives to find jobs and thus increase unemployment durations. Using a very clean natural experiment, this chapter shows that for large changes in the UI system, there appear to be no effects on post-unemployment job quality and moderate disincentive effects. |
