Testing for optimality in job search models
AbstractModels of search in labor markets are potentially of great use for policy analy-sis since their parameters are structural. However, a common feature of these models is that an assumption of optimal behavior on the part of agents is necessary to achieve identifica-tion. From a classical econometric perspective, this means the assumption of optimality is untestable and, if optimality is not imposed, it is impossible to learn about the unidentified parameters. This paper argues that Bayesian methods can overcome both of these problems. In particular, we discuss testing optimality in stationary job search models with reservation wages. Learning about economically meaningful quantities such as the discount rate and risk aversion, not identified by the data alone, is considered.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Econometrics Journal.
Volume (Year): 4 (2001)
Issue (Month): 2 ()
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- Paserman, Marco Daniele, 2004.
"Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation,"
CEPR Discussion Papers
4396, C.E.P.R. Discussion Papers.
- M. Daniele Paserman, 2008. "Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation," Economic Journal, Royal Economic Society, vol. 118(531), pages 1418-1452, 08.
- M. Daniele Paserman, 2004. "Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation," 2004 Meeting Papers 99, Society for Economic Dynamics.
- Paserman, Daniele, 2004. "Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation," IZA Discussion Papers 997, Institute for the Study of Labor (IZA).
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