A TEST BETWEEN STOCK-FLOW MATCHING AND THE RANDOM MATCHING FUNCTION APPROACH

This article tests between the standard "random matching function" approach and "stock-flow" matching while controlling for temporal aggregation bias. Consistent with previous empirical work, the random matching function fits the matching data reasonably well. But match flows are more highly correlated with vacancy inflows than is consistent with the random matching approach. Instead the data support stock-flow matching, where unemployed workers match directly with suitable new vacancies as such vacancies come on to the market. Copyright © (2008) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.