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Evaluating Search and Matching Models Using Experimental Data

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  • Lise, Jeremy

    ()
    (Queen's University)

  • Seitz, Shannon

    ()
    (Queen's University)

  • Smith, Jeffrey A.

    ()
    (University of Michigan)

Abstract

This paper introduces an innovative test of search and matching models using the exogenous variation available in experimental data. We take an off-the-shelf Pissarides matching model and calibrate it to data on the control group from a randomized social experiment. We then simulate a program group from a randomized experiment within the model. As a measure of the performance of the model, we compare the outcomes of the program groups from the model and from the randomized experiment. We illustrate our methodology using the Canadian Self-Sufficiency Project (SSP), a social experiment providing a time limited earnings supplement for Income Assistance recipients who obtain full time employment within a 12 month period. We find two features of the model are consistent with the experimental results: endogenous search intensity and exogenous job destruction. We find mixed evidence in support of the assumption of fixed hours of labor supply. Finally, we find a constant job destruction rate is not consistent with the experimental data in this context.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1717.

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Length: 47 pages
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1717

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Keywords: calibration; equilibrium search and matching models; policy experiments; Self-Sufficiency Project; welfare; social experiments;

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References

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  1. Davidson, Carl & Woodbury, Stephen A, 1993. "The Displacement Effect of Reemployment Bonus Programs," Journal of Labor Economics, University of Chicago Press, vol. 11(4), pages 575-605, October.
  2. Lin, Zhengxi, 1998. "Employment Insurance in Canada: Recent Trends and Policy Changes," Analytical Studies Branch Research Paper Series 1998125e, Statistics Canada, Analytical Studies Branch.
  3. Eran Yashiv, 2005. "Evaluating the Performance of the Search and Matching Model," CEP Discussion Papers dp0677, Centre for Economic Performance, LSE.
  4. Finn E. Kydland & Edward C. Prescott, 1994. "The computational experiment: an econometric tool," Staff Report 178, Federal Reserve Bank of Minneapolis.
  5. LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, vol. 76(4), pages 604-20, September.
  6. Patrick Bajari & Ali Hortacsu, 2003. "Are Structural Estimates of Auction Models Reasonable? Evidence from Experimental Data," NBER Working Papers 9889, National Bureau of Economic Research, Inc.
  7. Lise, Jeremy & Seitz, Shannon & Smith, Jeffrey A., 2003. "Equilibrium Policy Experiments and the Evaluation of Social Programs," IZA Discussion Papers 758, Institute for the Study of Labor (IZA).
  8. Michael P. Keane & Kenneth I. Wolpin, 2006. "Exploring the Usefulness of a Non-Random Holdout Sample for Model Validation: Welfare Effects on Female Behavior," PIER Working Paper Archive 06-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  9. Christensen, Bent Jesper & Mortensen, Dale & Neumann, George R. & Werwatz, Axel, 2000. "On the job search and the wage distribution," SFB 373 Discussion Papers 2000,108, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  10. David Card & Dean R. Hyslop, 2004. "Estimating the Effects of a Time Limited Earnings Subsidy for Welfare Leavers," NBER Working Papers 10647, National Bureau of Economic Research, Inc.
  11. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
  12. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  13. Lars Peter Hansen & James J. Heckman, 1996. "The Empirical Foundations of Calibration," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 87-104, Winter.
  14. Harold L. Cole & Richard Rogerson, 1996. "Can the Mortonson-Pissarides matching model match the business cycle facts?," Staff Report 224, Federal Reserve Bank of Minneapolis.
  15. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  16. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
  17. Card, D. & Michalopoulos, C. & Robins, P.K., 2001. "Measuring Wage Growth Among Former Welfare Recipients," Papers 2001-5, Gouvernement du Canada - Human Resources Development.
  18. Connolly, Helen & Gottschalk, Peter T., 2004. "Do Earnings Subsidies Affect Job Choice?," IZA Discussion Papers 1322, Institute for the Study of Labor (IZA).
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Citations

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Cited by:
  1. Jeffrey R. Kling, 2007. "Methodological Frontiers of Public Finance Field Experiments," NBER Working Papers 12931, National Bureau of Economic Research, Inc.
  2. Bellemare, Charles & Shearer, Bruce S., 2009. "On the Relevance and Composition of Gifts within the Firm: Evidence from Field Experiments," IZA Discussion Papers 4339, Institute for the Study of Labor (IZA).
  3. Joseph P. Kaboski & Robert M. Townsend, 2011. "A Structural Evaluation of a Large‐Scale Quasi‐Experimental Microfinance Initiative," Econometrica, Econometric Society, vol. 79(5), pages 1357-1406, 09.
  4. Jeremy Lise & Shannon Seitz & Jeffrey Smith, 2003. "Equilibrium Policy Experiments and the Evaluation of Social Programs," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20032, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  5. Wasmer, Etienne & Woll, Cornelia, 2011. "Scientific project, Sciences Po | LIEPP laboratoire interdisciplinaire d'evaluation des politiques publiques or in english, interdisciplinary research center for the evaluation of public policies," MPRA Paper 31434, University Library of Munich, Germany.
  6. Card, David & Hyslop, Dean R., 2009. "The dynamic effects of an earnings subsidy for long-term welfare recipients: Evidence from the self sufficiency project applicant experiment," Journal of Econometrics, Elsevier, vol. 153(1), pages 1-20, November.
  7. Angelucci, Manuela & De Giorgi, Giacomo, 2006. "Indirect Effects of an Aid Program: The Case of Progresa and Consumption," IZA Discussion Papers 1955, Institute for the Study of Labor (IZA).

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