Aggregate Implications of Employer Search and Recruiting Selection

This paper develops a general equilibrium model of nonsequential employer search with recruiting selection and heterogeneous workers, and characterizes its equilibrium. Unlike standard search models, employers can simultaneously meet several applicants and choose the best candidate. Recruiting selection is empirically important: firms interview a median of 5 applicants per vacancy and spend 2.5% of their total labor cost in these activities. The model provides an endogenous matching process with heterogeneous workers in which the job nding probability increases in productivity. Under recruiting selection, lifetime inequality increases relative to the sequential search benchmark due to e ects on job nding rates and wages. Search frictions coupled with recruiting selection generate new kinds of externalities that a ect not only transition probabilities, but also the expected productivity of recruited workers. The calibrated model can replicate moments of the distribution of wages and unemployment durations in CPS data. Using this parametrization, I also show that an increase of screening costs reduces inequality and productive e fficiency, and decreases negative externalities on other employers