| Description |
In one-sided markets with externalities and established, tradeable property rights, the Coase Theorem states that agents can negotiate to a Pareto efficient outcome. For intermediaries serving one-sided markets between two or more groups of agents, transaction volume is completely dependent on total price level. Thus, intermediaries cannot alter transaction volume by changing the price allocation across the participating groups. However, in multisided markets (or platforms), the intermediary must coordinate the participation of different groups whose behavior exhibits indirect network externalities: one group of agents participates because another group participates. This means the intermediary can alter transaction volume by changing the price allocations across the groups of agents. This dissertation analyzes administrative data from Utah and other states to investigate whether the U.S. Employment Service (USES), a federal agency that partners with state employment security agencies (SESA), operates as an intermediary of a two-sided market. If the USES does serve a two-sided market, strategic services (subsidies) could be utilized to coordinate the participation of employers and job seekers. The results indicate some evidence the public labor exchange does function as a two-sided market. When the USES or SESA provide services to job seekers such as employment counseling, testing or skills training, this creates a positive indirect network externality for employers as it increases the qualified pool of labor available to them on the USES platform. This appears to lead to their increased participation. |
