Duration Dependence, Endogenous Search and Structural Analysis of Labor Market Histories
AbstractThis paper studies a structural model of labor market history in an environment with duration dependence. We treat the agent's job search effort explicitly as part of the dynamic decision along with a binary employment choice. The optimal policy is shown to exist and to be of the stationary reservation-wage type. Based on the characterization of the optimal policy, we then show: (1) the value function exhibits inverse-L shaped indifference curves and hence is neither differentiable nor concave, (2) the optimal search effort is decreasing in the realized unmeasured utility shocks, and (3) the labor market history is semi-Markovian, These implications lead naturally to an estimable structural model of labor market histories.
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Bibliographic InfoPaper provided by Duke University, Department of Economics in its series Working Papers with number 95-13.
Date of creation: 1995
Date of revision:
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Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097
Phone: (919) 660-1800
Fax: (919) 684-8974
Web page: http://econ.duke.edu/
Find related papers by JEL classification:
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
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