Cross-Section Estimation of the Matching Function: Evidence from England and Wales

This paper analyses how the levels of unemployment and vacancies affect the rate at which unemployed workers find employment - the worker-firm 'matching function'. In particular we test the robustness of previous empirical work by checking whether we obtain the same estimated function using cross-section data rather than aggregate time-series data. We find strong evidence of constant returns to scale similar to previous work. We also find larger cities have higher wages. This provides indirect support for increasing returns, but where those returns are taken in the form of better-quality matches.