Search and employer-employee match formation

This study examines several areas of firm and employer search. Search Theory has become a popular tool for analyzing labor economics; however, most work has focused on how the worker searches for a job. Little work has been done exploring how firms search for workers. This study attempts to fill that void. Three specific areas of how the firm and worker search and the effects of search on the firm and worker are examined.; First, a model is developed showing how firms and workers have an incentive to gather information prior to forming an employer-employee match. The model predicts that additional information results in better decisions being made and fewer matches failing. Empirical tests on hazard rates support this hypothesis. Spending more time searching and gathering information results in a lower probability of turnover. Also, additional information is predicted to result in employers making better estimates about a worker's marginal productivity. Tests do not support this hypothesis. However, unobservable factors appear to play a role In this.; Second, firm search in a monopsony labor market is examined. Theory suggests that monopsonist will gain more from search if search allows the monopsonist to determine a worker's elasticity of labor supply. Determining labor supply elasticities allows firms' to find workers willing to work at lower wages. For monopsonists this keeps the total wage bill from growing as fast as it would without search. Empirical tests offer weak support of this.; Finally, earlier work examines if firms are able to extract rents associated with the minimum wage. This work does not address how search costs may be used to extract these rents from minimum wage workers. This study controls for search costs and finds that firms are able to extract minimum wage rents in part by shifting the costs of search to the worker.