An Empirical Investigation of the Returns to Job Search
Abstract
The assumption of diminishing to job search plays a crucial role in the search model presented recently in this Review by John Seater. This assumption is justified by noting that spatial aspects of the search cause diminishing returns since travel time required to search firms in a circular area increases faster than the area to be searched. Besides being an important property of a class of theoretical models, to search may partly explain the paradox of an approximately forty-hour workweek contrasted with a seven-hour search-week (see John Barron and Wesley Mellow, p. 396). The interaction of diminishing to and positive costs of search may result in an optimal allocation of search time of only a few hours per week. In this paper, I examine whether the assumption of diminishing to job search can be supported by the data. Following Seater, the to search are measured by the number of firms contacted, and the focus is on the ability of unemployed individuals to translate search time into employee contracts. Returns to search are evaluated by noting whether the production process exhibits diminishing with respect to the input variable.
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