Job Search and Vacancy Contacts

Abstract

In this paper, I show the need for and then derive a model in which the number of vacancies contacted by a job searcher depends on the intensity of search, with diminishing returns to search intensity. The usual assumption of the search literature (for example, see Dale Mortensen, 1970a) is that the number of vacancies contacted per period by a searcher is fixed. Such fixity is unsatisfactory for two obvious reasons. First, participants can vary the intensity of search and consequently can vary the number of vacancies contacted per period. Second, the number of existing vacancies changes over the business cycle so that, for a given search intensity, the number of vacancies contacted should change, too. Besides these flaws, the assumption of a constant vacancy contact rate turns out to imply that a participant never chooses to work and search simultaneously. Simultaneous work and search requires that the function describing a searcher's vacancy contact rate exhibit diminishing returns to search intensity, a property I call diminishing physical returns to search. The requirement for diminishing physical returns holds even when the individual maximizes a concave utility function; diminishing utility returns to search are insufficient to allow simultaneous work and search. Thus, for example, Mortensen's (1977) discussion of simultaneous work and search is inappropriate in his utility-maximizing model in which the vacancy contact rate is a linear function of search intensity. Even though simultaneous work and search requires diminishing physical returns to search, it is not immediately apparent what the source of such diminishing return would be.' At first glance, it may seem that if a searcher doubles his search intensity, he should double the number of vacancies he contacts. However, under the assumption that search requires travelling to firms to seek vacancies (rather than calling on the telephone, for example), it turns out that an increase in search intensity leads to a less than proportional increase in vacancy contacts. The reason is essentially that increasing the number of vacancies contacted requires an increase in the area over which search is conducted and the travel time required to cover this area increases faster than the area to be covered. Thus diminishing returns arise for spatial reasons. The model developed in this paper proves the foregoing propositions and also provides some other interesting insights, the most important being a nullification of the criticism by James Tobin, Robert J. Gordon, and others that search theory produces incorrect predictions of the cyclical behavior of quits.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 63 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.