ENTRYHIRE · Entry-Level Hiring in Tightening Labor Markets: Frictions, Firm Heterogeneity and Public Policy

Firms’ hiring of labor market entrants is crucial for individual access to opportunity and the economy’s skill level. However, it involves a complex search and screening process that is prone to frictions. While macroeconomic research has shown that the efficiency of labor market matching depends on recruitment intensity, micro-level evidence on firms’ underlying behavior remains limited, mainly due to a lack of suitable data. Yet, such evidence is essential for understanding and improving labor market matching, particularly given ongoing demographic change and increasing market tightness in many economies.The objective of ENTRYHIRE is to provide a systematic understanding of (i) firms’ hiring behavior and outcomes in tightening entry-level labor markets, (ii) the nature of underlying frictions and firm heterogeneity, and (iii) the effects of policies aimed at removing hiring frictions. As a ‘laboratory’ for studying the microeconomics of entry-level hiring, I draw on the German apprenticeship market, which features well-defined vacancy and applicant pools, a structured timeline, as well as exogenous tightness and policy variation.ENTRYHIRE will collect and combine novel data from different sources, including employer-employee records, a matching platform, and the records of a large-scale hiring assistance program. Moreover, it will develop and implement a survey framework to elicit firms’ hiring tradeoffs. Combined with innovative empirical research designs, the collected data will enable a comprehensive view on firms' typically unobserved search and screening processes and their links to realized hiring outcomes.The project will create systematic knowledge on the interaction between labor market tightness, firms’ hiring behavior, and public policy on entry-level markets. It will provide new empirical ground for economic models of labor market matching and inform policies aimed at promoting an efficient matching of young workers to jobs.