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Testing optimality in job search models

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Author Info
John W. Schindler
Abstract

This paper uses Bayesian techniques to compare three definitions of optimality for the basic job search model: the standard income-maximizing definition, an approximation to the standard definition, and a simple alternative. The important role of prior choice in these comparisons is illustrated. Using natural conjugate priors to represent hypothetical samples of data, we find that the simple alternative is preferred to the standard definition of optimality. However, using priors constructed from findings in the literature, we are able to find some evidence in favor of the standard definition of optimality.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 710.

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Date of creation: 2001
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Handle: RePEc:fip:fedgif:710

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Related research
Keywords: Econometric models ; Job analysis;

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  1. Kiefer, Nicholas M & Neumann, George R, 1979. "An Empirical Job-Search Model, with a Test of the Constant Reservation-Wage Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 89-107, February. [Downloadable!] (restricted)
  2. Lancaster, Tony, 1997. "Exact Structural Inference in Optimal Job-Search Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 165-79, April.
  3. Koop, Gary, 2001. "Bayesian inference in models based on equilibrium search theory," Journal of Econometrics, Elsevier, vol. 102(2), pages 311-338, June. [Downloadable!] (restricted)
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  4. James J. Heckman & Christopher J. Flinn, 1982. "New Methods for Analyzing Structural Models of Labor Force Dynamics," NBER Working Papers 0856, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 397-415, July. [Downloadable!] (restricted)
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  6. Khandker, Rezaul K, 1988. "Offer Heterogeneity in a Two State Model of Sequential Search," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 259-65, May. [Downloadable!] (restricted)
  7. Christensen, Bent Jesper & Kiefer, Nicholas M., 1991. "The Exact Likelihood Function for an Empirical Job Search Model," Econometric Theory, Cambridge University Press, vol. 7(04), pages 464-486, December. [Downloadable!]
  8. Narendranathan, W & Nickell, S & Stern, J, 1985. "Unemployment Benefits Revisited," Economic Journal, Royal Economic Society, vol. 95(378), pages 307-29, June. [Downloadable!] (restricted)
  9. Christensen, B.J. & Kiefer, N.M., 1990. "The Exact Likelihood Function For An Empirical Job Search Model," Papers 9017, Tilburg - Center for Economic Research.
  10. repec:cup:etheor:v:7:y:1991:i:4:p:464-86 is not listed on IDEAS
  11. Dale Mortensen, 1984. "Job Search and Labor Market Analysis," Discussion Papers 594, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  12. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-76, November. [Downloadable!] (restricted)
  13. Kiefer, Nicholas M & Steel, Mark F J, 1998. "Bayesian Analysis of the Prototypal Search Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 178-86, April.
  14. Koop, Gary & Potter, Simon M., 1998. "Bayes factors and nonlinearity: Evidence from economic time series1," Journal of Econometrics, Elsevier, vol. 88(2), pages 251-281, November. [Downloadable!] (restricted)
  15. Wolpin, Kenneth I, 1992. "The Determinants of Black-White Differences in Early Employment Careers: Search, Layoffs, Quits, and Endogenous Wage Growth," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 535-60, June. [Downloadable!] (restricted)
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