Working Paper Series,
Stockholm University, Swedish Institute for Social Research

Abstract: This paper is, firstly, a reappraisal of the matching function, arguing that the proper specification of the relation between hirings (H), vacancies (V), and unemployment is the duration function, which shows how average recruitment times as measured by V/H depend on unemployment and other relevant variables. Secondly, indirect effects of longer recruitment times on employment through higher recruitment costs are studied by extending previous models to include both price formation and the distinction between vacancy costs and hiring costs. Thirdly, direct effects of longer recruitment times on employment through more unfilled jobs are explored and illustrated with data from Sweden since 2000 from a new business survey, which measures not only job vacancies but also unfilled jobs.

Keywords: Vacancies; hirings; matching function; friction

JEL-codes: J63; J64

26 pages, December 30, 2004

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