Kelly, Sean, Grainger, Daniel, Sun, Sizhong, and Welters, Riccardo (2025) The Labour Market Matching Efficiency in Australian Regions. Economica. (In Press)

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Abstract

We advance the literature on estimating job matching functions in two ways. Scholars acknowledge that past matching efficiency affects current job search and posting behaviour (i.e., tightness is endogenous), however, so far ignore that forecast (lead) matching efficiency may also affect tightness. We specify a model that accommodates lagged and lead efficiency to address both endogeneity channels. Scholars also acknowledge that matching efficiency may be region specific, however, a test to formally evaluate matching heterogeneity is missing, for which we develop a χ^2-distributed test statistic. Using regional Australian data, we (a) demonstrate that lead matching efficiency indeed endogenizes labour market tightness and (b) confirm matching heterogeneity in the Australian regional context. Both innovations have policy relevance, and their application will improve matching efficiency estimates and provide policymakers with a tool to test whether region-specific labour market policy is warranted.

Item ID:	86646
Item Type:	Article (Research - C1)
ISSN:	1468-0335
Keywords:	Matching efficiency, Geographic separation, Labour market tightness, Matching function estimation
Date Deposited:	13 Aug 2025 22:58
FoR Codes:	38 ECONOMICS > 3801 Applied economics > 380111 Labour economics @ 60% 38 ECONOMICS > 3801 Applied economics > 380118 Urban and regional economics @ 40%
SEO Codes:	15 ECONOMIC FRAMEWORK > 1505 Microeconomics > 150507 Micro labour market issues @ 100%
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