General Seminar Series No. 5 – Professor Susan Vroman (Georgetown University)

Directed Search with Phantom Vacancies

Abstract: When  vacancies  are  filled,  the  ads  that  were  posted  are  often  not  withdrawn,  creating  "phantom"  vacancies. The  existence  of  phantoms  implies  that  older  job  listings  are less likely to represent true vacancies than are younger ones. We assume that job seekers direct their search based on the listing age and so equalize the expected benefit of a job application across listing age.  Forming a match with a vacancy of age a creates a phantom of age a with probability β and this leads to a negative informational externality that affects all vacancies of age  a  and  older.  Thus,  the  magnitude  of  this  externality  decreases  with  the  age  of  the listing when the match is formed.  Relative to the constrained efficient search behavior, the directed  search  of  job  seekers  leads  them  to  over-apply  to younger  listings.  We calibrate  the  model  using  US  labor  market  data.  The  contribution  of  phantoms  to overall  frictions is  large,  but,  conditional  on  the  existence  of  phantoms,  the  social  planner  cannot  improve much on the directed search allocation.


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Virtual – Contact:
Professor Susan Vroman (Georgetown University)