The role of the short-term employed in the matching process before and after the crisis Empirical evidence from the Netherlands

This study uses data from 2001 to 2014 to explore the role of employed jobseekers in the Dutch labour market matching process, accounting for employed workers’ heterogeneities using employment spells. The elasticity of hires with respect to the short-term employed was significant, positive and countercyclical, while elasticities relating to new entrants were procyclical. The findings are at odds with the idea of mismatch and a shortage of skills. Search frictions for employers were lower after the crisis and vacancies were filled faster. In a loose labour market context with increasing short-term employment, employers increase their hiring of employed workers. The matching function displays constant returns to scale (CRTS) when using an alternative labour supply measure that includes the short-term employed as jobseekers. The theoretical implications concern the traditional CRTS assumption when using unemployment as a labour supply measure. In relation to policy implications, this points to the need for fiscal policies to fight unemployment.