VACANCY DURATIONS: SEARCH OR SELECTION?

AuthorJ. C. van Ours,G. Ridder
DOIhttp://doi.org/10.1111/j.1468-0084.1993.mp55002003.x
Publication Date01 May 1993
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 55, 2(1993)
030 5-9049 $3.00
VACANCY DURATIONS: SEARCH OR
SELECTION?
J. C. van Ours and G. Ridder*
I. INTRODUCTION
There is a renewed interest in the use of vacancy data in empirical macro-
economics. Following the lead of Diamond (1971), economists consider the
matching of jobs and workers in the labour market as a productive activity,
that can be described by a production function, the matching function. In the
matching function the number of new hires is related to the number of
workers (employed or unemployed) who are looking for a job and the
number of jobs who are looking for a worker, i.e. the number of job vacan-
cies.' If the matching function has constant returns to scale, as is confirmed in
most empirical studies, then the matching function implies a stable rela-
tionship between the average duration of unemployment and the average
duration of vacancies.
As stressed by Blanchard and Diamond (1989) and Jackman, Layard and
Pissarides (1989), decomposing changes of these durations in movements
along and shifts of this relation is helpful in understanding the causes of
cyclical and secular changes in the unemployment rate. For instance,
Jackman, Layard and Pissarides find that between 1960 and 1982 the unem-
ployment/vacancy duration curve has shifted outward in the UK, and by a
process of elimination they conclude, that the cause of this shift is that the
unemployed have decreased their intensity of search.
Although the measurement of unemployment has its own ambiguities, it is
clear that the concept of a job vacancy is the more elusive of the two. In a
steady state the number of job vacancies is equal to the product of the rate at
which vacancies are created and the average duration of the vacancies. It is
usually assumed, that the number of vacancies at a firm is equal to the differ-
ence between the number of productive jobs and the present number of
employees, so that the rate at which vacancies are created is equal to the sum
of the net rate at which productive jobs are generated and the rate at which
*The authors would like to thank the Organization for strategic Labor Market Research
(OSA) for the use of the vacancy data and Ruud Koning and Ken Burdett for helpful comments.
I Although the matching function approach goes back to at least Holt (1970), more recent
contributions are Jackman, Layard and Pissarides (1989) and Blanchard and Diamond (¡989).
187

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