Directed-job match with hetereogeneity

Matching process involves three stages of selection: application, candidates selection and job acceptance. In traditional matching models all three stages are assumed random, while in the directed-search literature only the first stage is generally assumed ‘directed’. This paper develops a job-matching model where all three selection stages are directed, by introducing heterogeneous preferences of firms and workers. Both firm-level and aggregate matching functions are derived, which in a comparison with random-matching models reveals that the coordination failure problem is worse under heterogeneous directed-match when the number of vacancies is small, but is better when it is large. Furthermore directed-search limits friction when the market consists of fewer but larger firms