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ResearchJanuary 27, 2020

How broadband internet affects labor market matching

Improved recruitment process leads to better and more stable employment relationships

© iStockphoto.com/fizkes

The internet may affect labor market matching by reducing information asymmetries and labor market frictions, potentially leading to higher pay, more stable employment and lower unemployment rates. However, these effects are not well understood due to a lack of data on job vacancies and quasi-experimental variation in internet use.

A new IZA discussion paper by Manudeep Bhuller, Andreas R. Kostøl and Trond C. Vigtel helps fill this gap using plausibly exogenous roll-out of broadband infrastructure in Norway, and comprehensive data on recruiters, vacancies and job seekers.

The main results of the paper can be summarized in three broad conclusions.

  1. Broadband internet has improved the recruitment process: The authors find that broadband expansions increased online vacancy-postings, shortened the average duration of a vacancy by 9%, and lowered the share of establishments with unfilled vacancies by 13%.
  2. Job seekers with broadband internet access were more likely to find a new job, and starting wages after a spell of unemployment increased by 3-4% as an effect of better broadband internet availability.
  3. The analysis also shows more stable employment relationships, which is in line with better match quality.

The authors’ calculations suggest that the steady-state unemployment rate fell by as much as one-fifth due to improvements in matching efficiency and falling cost of gathering information about job vacancies.

Featured Paper:

IZA Discussion Paper No. 12895 How Broadband Internet Affects Labor Market Matching Manudeep Bhuller, Andreas Ravndal Kostol, Trond Christian Vigtel

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  • broadband
  • Internet
  • matching
  • Norway
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  • unemployment
  • vacancy
  • Andreas R. Kostøl
  • Manudeep Bhuller
  • Trond C. Vigtel
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