Labor Flows and the Aggregate Matching Function: A Network-Based Test Using Employer-Employee Matched Records

Abstract

The assumption of aggregate matching functions in labor markets is tested using a network configuration model for directed multigraphs. We use employer-employee matched records of the universe of employees and firms in Finland and find that aggregate matching functions, even at the level of submarkets, cannot explain the vast majority of the observed patterns of labor flows between firms. Our findings suggest the need for theoretical frameworks that take into account the structure of labor market frictions.