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Abstract

In a non-stationary job search model we allow unemployed workers to have a permanent option to leave the labor force. Transitions into nonparticipation occur when reservation wages drop below the utility of being nonparticipant. Taking account of these transitions allows the identification of duration dependence in the job offer arrival rate and the wage offer distribution. We estimate the structural model with individual data from the German Socio- Economic Panel and use simulated maximum likelihood. The results show that the presence of significant negative duration dependence in the wage offer distribution causes reservation wages to decrease. The rate at which job offers arrive is constant over the unemployment duration. These findings provide micro evidence that the job search environment of unemployed workers is non-stationary because of loss of skills.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1407.

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Length: 49 pages
Date of creation: Nov 2004
Date of revision:
Publication status: published in: Economic Journal, 2006, 116 (508), 45-83
Handle: RePEc:iza:izadps:dp1407

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Related research

Keywords: endogenous nonparticipation; non-stationary job search; duration;

Other versions of this item:

Find related papers by JEL classification:

• J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
• J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
• J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy
• J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
• C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

This paper has been announced in the following NEP Reports:

• NEP-ALL-2004-12-02 (All new papers)

References

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