This paper focuses on a congestion externality in the labour market which is caused by non-sequential search. A model is presented in which unemployment is caused by selection delays of employers. It is shown that the individual probability to get a job offer is increasing in the number of applications while the aggregate hiring rate is decreasing in the average amount of applications per applicant. Moreover, in the decentralized equilibrium, screening information is lost when a worker is found unsuitable for a particular job and the next firm has to spend screening time on this worker again. The congestion externality can be reduced by institutions which specialize in screening large groups of workers such as temporary employment agencies, labour offices and head hunters, which only screen workers once before they allocate them to suitable jobs.

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Economic Modelling
Tinbergen Institute

Gautier, P.A. (2002). Non-sequential search, screening externalities and the public good role of recruitment offices. Economic Modelling, 19(2), 179–196. doi:10.1016/S0264-9993(01)00059-1