Measuring Effective Searchers with Quantity Indexes

To measure labour market tightness or estimate aggregate matching functions, it is common to construct measures of ‘effective searchers’. These measures aggregate together different types of job seekers, such as the unemployed, employed and those not in the labour force. This paper connects the measurement of effective searchers to index number theory for the first time. This provides several insights. Firstly, the measure commonly used in previous literature is a Lowe quantity index. Secondly, one could instead use quantity indexes that use time-varying job-finding rates, such as a Tornqvist or Fisher index. Finally, one should not measure effective searchers as linear combinations of quantities with time-varying coefficients. The effect of using different quantity indexes is illustrated with Australian data.