Applications and Interviews Firms ’ Recruiting Decisions in a Frictional Labor Market∗

I develop a directed search model of the labor market in which firms choose a re-cruiting intensity, determining the number of applicants they will interview. Interviewing applicants is costly but reveals their productivity, allowing the firm to hire better workers. I characterize the equilibrium and find that the uniqueness and cyclicality of recruiting intensity crucially depend on parameter values. Calibration of the model to the US labor market indicates a multiplicity of the equilibrium. An increase in aggregate productivity— given selection of a particular equilibrium—causes recruiting intensity to move counter to unemployment, while a shock to the equilibrium selection rule predicts the opposite pat-tern. ∗A previous version of this paper circulated under the title “Applications and Interviews: A Structural Analysis of Two-Sided Simultaneous Search. ” I am very grateful to Philipp Kircher for feedback at variou