Search, Screening and Sorting
By Pieter Gautier, Xiaoming Cai and Ronald Wolthoff
We investigate the effect of search frictions on labor market sorting by constructing a model which is in line with recent evidence that employers collect a pool of applicants before interviewing a subset of them. In this environment, we derive the necessary and sufficient conditions for positive and negative assortative matching, which depend on the degree of complementarity in production and the extent to which firms can interview applicants. Challenging the conventional wisdom that search frictions are necessarily a force against sorting, we find that the required degree of complementarity for positive
assortative matching is increasing in the number of interviews: it ranges from rootsupermodularity if each firm can interview a single applicant to log-supermodularity if each firm can interview all its applicants. We show that our results are robust to a large number of alternative specifications of the matching process.