Hours Worked and Employment in a Search and Matching Model with Application in Hong Kong

Description

This project will explore the dynamics of employment, nonemployment, and hours worked in a search and matching model with heterogeneous workers and will investigate its applications in Hong Kong using quarterly microstructure data of the general household survey from the Census and Statistics Department of Hong Kong. The project will first set up a search and matching model with heterogeneous workers and hours worked. Then the model will be generalized to include heterogeneity across the observable personal characteristics in data, such as occupation, industry, educational attainment, and earnings, and the characteristics of the households they belong to, such as type of accommodation, tenure, rent, household size, and household income. Nonemployed workers will be allowed to decide whether to search for jobs and become unemployed or stay out of the labor force in the model. When the opportunity cost of working is different across individuals, some unemployed workers will stop searching for a job (drop out of the labor force) if the optimal hours worked results in a negative job surplus. For example, a low-skilled unemployed mother with a new-born baby may become a home-maker because her home production increases relative to the average revenue she can generate on a job. After solving and analyzing the search and matching model, the results will be fitted into the data from the Census and Statistics Department of Hong Kong. The microstructure data from the general household survey will be merged with the data of vacancy posting by occupation, industries, and firm level characteristics. The situations of the labor market will be investigated using the combined data with household characteristics, personal characteristics, and firm vacancy posting. This project will also explore suggestive labor-market policies such as how to regulate hours worked efficiently taking into account both employee benefits and the growth of firms (especially young and productive but financially constrained firms) which is key to the economic growth in Hong Kong.