Monday, January 03, 2011

Search Friction

Browsing through the pages of an edition of Forbes India, I chanced upon an article on last year's Nobel Prize for economics winner - Dale T. Mortensen. The article was on a concept in economics known as 'search friction'. In layman terms, search friction refers to the imperfect information about finding out where jobs are and where workers are for the appropriate jobs. He goes on to say that the traditional economics model of demand and supply does not hold water. Unemployment and job vacancies exist simultaneously because it takes time and money for companies and job seekers to find the perfect match.

Well... This is the effect of a whole term of Macroeconomic Environment... A guy who was never caring about these 'wordly terms' is suddenly finding economics interesting (and that guy is me by the way)!! But jokes apart, this is interesting. It explains a lot of phenomenon that we see daily. Haven't we heard friends crying out that someone somewhere has got job in a big shot XYZ company whereas with the same skill set he is languishing in KLM (sorry I cudnt get another combination of triplet) company, which means getting paid less for same kind of job. Its partly his and partly the system's fault. There exists imperfect information - in companies, with recruiters and even with job seekers. And its much more pertinent in India where formal systems are yet to get in place for a totalitarian information database. And these are the fallouts of a developing economy.
Perfect match... Hmm... Seems like some marriage bureau at work... But hey, don't they also operate on the same... They also work on this 'imperfect information' and try to 'perfect' them... They also try to fill this gap, so to say... But does it always work? Well, that is open to debate. In the same way, there are so many internet based job search engines like, etc. But are they efficient? I know so many recruiters who still work on the 'contacts' mechanism, that is getting their own employees to refer friends because they believe that those references provide 'perfect information'.
But there is hope. The whole concept of UID, popularly known as Adhaar, will, I believe, solve this imperfection. Just like the finance department is looking up to it for providing 'financial inclusion', I think this would solve the issue of search friction too. The whole information database that the UID system is creating is going to be a huge boost to many sectors. Apart from just providing the election information of each and every citizen of India, it can be used to store employment records, bank accounts, credit information, education information, legal information and what not. Wow! What opportunities will it open up! An employer could get information to any citizen with a particular skill set and work experience. No requirement of job search agencies and no need to post and update your profile there. Cool, isnt it?

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Abhishek Saha
Lucknow, Uttar Pradesh, India
A NRB (Non Resident Bengali) or rather a 'Probashi Bangali'; born in Kolkata, brought up in Jamshedpur and now trying to make his mark at IIM Lucknow.
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