Randomness or stock-flow: Which mechanism describes labour market matching in Poland?

Abstract

I compare random, stock-flow and job queuing models to determine which mechanism prevails in the Polish labour market. I use monthly registered unemployment data for the period 1999 - 2013 and econometrically correct for temporal aggregation bias in the data. I extend the known solutions to make them directly applicable to a job queuing model. I find that stocks and inflows engage in a matching process. Job seekers (from the pool) seek work among old and new job posts, but only a small fraction of the newly unemployed individuals find work instantaneously. Vacancies are the driving force in aggregate hiring, but the inflow is more important than the stock. The random model has greater explanatory power, although the results do not negate the non-random model. The random model entails the need to improve information to facilitate matching. The stock-flow model implies that policy should aim at creating more job offers.