Matching Through Search Channels

Abstract
Firms and workers predominately match via job postings, networks of personal contacts or the public employment agency, all of which help to ameliorate search and information frictions in the labor market. In this paper we investigate the extent to which these search channels have differential effects on labor market outcomes. Using novel survey-administrative data for Germany we find that (i) low-wage firms and low-wage workers are more likely to find matches via networks or the public agency, while high-wage firms and high-wage workers succeed more often via job postings; (ii) networks and job postings help to poach and to attract high-wage workers, differentially across firm wage ranks. To evaluate the implications of our findings for labor market sorting, worker turnover and wage inequality, we structurally estimate an equilibrium job ladder model featuring two-sided heterogeneity and multiple search channels. Our results point at an important role of networks for labor market sorting, while the public employment agency has only a modest impact on unemployment, even for low-productivity workers.