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Essays on Search and Screening Frictions



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Mylius, Felix 


Frictions form an integral part of the job search. Search and screening costs make the matching process for workers and firms costly, and asymmetric information can significantly contribute to mismatch: workers cannot observe who else applies to a vacancy, whereas firms cannot observe what other jobs their candidates have applied to. Moreover, even upon screening their candidates, firms only get an imperfect signal of the candidate's skill level. I consider some of these frictions in my theoretical frameworks in each chapter of my thesis.

The first chapter studies whether workers can benefit from higher application costs. While this might sound counterintuitive since applicants are harmed by paying more, they, in fact, benefit from reduced congestion: if costs are negligible, workers apply excessively, overloading firms with applications. Thus, with higher costs, firms receive fewer applications from uninterested applicants, which allows them to focus their screening efforts on interested candidates. This means that higher costs increase the chance that a worker matches with their preferred firm. When characterising the conditions under which workers benefit from cost increases, I show that not only how many applications are directly withdrawn through a cost increase matters, but also the nature of application strategies, given that those are either strategic substitutes or complements. In the case of strategic complements, cost increases are more impactful. My findings provide a novel perspective on application costs, challenging the conventional view that higher costs would harm applicants.

The fact that lower search barriers make workers apply to firms they are less interested in also plays a central role in the second chapter, albeit in a different context. I address the phenomenon that job referrals are still as essential in labour markets as they used to be over the past decades. Since the internet has made searching and applying for jobs much easier, one would expect people to rely less on social contacts to find a job nowadays. To find an answer to this puzzle, I explore a new channel that makes referred candidates stand out among all applicants: a higher likelihood of accepting a job offer. This trait becomes particularly advantageous whenever firms face large uncertainty over whether their candidates would accept their job offer. If search barriers vanish and workers apply to more firms, a referred candidate expects to face more competitors. On the other hand, if workers apply to more firms, they are, on average, less interested in each firm they apply to, which makes referred candidates stand out more. This means the chances of getting a job offer through a referral can increase if search barriers decrease.

My third chapter is based on a joint project with Dr Keith Chan from the Hong Kong University of Science and Technology. We study the impact of economic downturns on the skill composition of unemployed workers. Since screening is imperfect, this question is fundamental for firms that are considering posting vacancies. Therefore, numerous papers have studied this topic theoretically and empirically. However, their results contradict each other, meaning there is no consensus on the net impact of shocks. To reconcile this division, we provide a tractable framework to understand (i) what factors drive the skill composition of unemployed workers and (ii) how productivity shocks affect those drivers. To provide a comprehensive analysis, we allow for productivity shock changes in both frequency and severity. We find that changes in either dimension induce effects that have opposite directions, making the net change of the average skill of an unemployed worker ambiguous. Moreover, we characterise the circumstances under which the net impact is positive or negative.





Elliott, Matthew


Labour Markets, Matching, Search


Doctor of Philosophy (PhD)

Awarding Institution

University of Cambridge
Faculty of Economics Cambridge European Scholarship