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New Methods for Analyzing Structural Models of Labor Force Dynamics

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  • James J. Heckman
  • Christopher J. Flinn

Abstract

This paper takes a first step toward developing econometric models for the structural analysis of labor force dynamics. Our analysis is presented in continuous time, although most of the points raised here can be applied to discrete time models. We show that in previous attempts to estimate "structural" models of job search, a key source of information necessary to identify certain structural parameters has been neglected. We discuss the conditions under which structural search models can be estimated. In particular, the wage offer distribution must be recoverable -- i.e., it must be the case that the parameters of the untruncated wage offer distribution be estimable from the truncated accepted wage distribution. The wage offer distribution must be assumed to belong to a parametric family. Estimates of structural parameters are shown to be sensitive to the distributional assumption made. A partial equilibrium two state model of employment dynamics is estimated, using data from the National Longitudinal Survey of Young Men. We find employment and nonemployment rates implied by the structural parameter estimates to be generally consistent with those observed for the population of young males.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0856.

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Date of creation: Feb 1982
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Publication status: published as Flinn, C. & Heckman, J., 1982. "New methods for analyzing structural models of labor force dynamics," Journal of Econometrics, Elsevier, vol. 18(1), pages 115-168, January.
Handle: RePEc:nbr:nberwo:0856

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  1. Toikka, Richard S, 1976. "A Markovian Model of Labor Market Decisions by Workers," American Economic Review, American Economic Association, American Economic Association, vol. 66(5), pages 821-34, December.
  2. James J. Heckman & Robert J. Willis, 1975. "A Beta-Logistic Model for the Analysis of Sequential Labor Force Participation by Married Women," NBER Working Papers, National Bureau of Economic Research, Inc 0112, National Bureau of Economic Research, Inc.
  3. James J. Heckman & Robert J. Willis, 1974. "Estimation of a Stochastic Model of Reproduction: An Econometric Approach," NBER Working Papers, National Bureau of Economic Research, Inc 0034, National Bureau of Economic Research, Inc.
  4. KIEFER, Nicholas M. & NEUMANN, George R., . "An empirical job-search model, with a test of the constant reservation-wage hypothesis," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -358, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Tuma, Nancy Brandon & Robins, Philip K, 1980. "A Dynamic Model of Employment Behavior: An Application to the Seattle and Denver Income Maintenance Experiments," Econometrica, Econometric Society, Econometric Society, vol. 48(4), pages 1031-52, May.
  6. Heckman, James J & Macurdy, Thomas E, 1980. "A Life Cycle Model of Female Labour Supply," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 47(1), pages 47-74, January.
  7. Lewis, H Gregg, 1974. "Comments on Selectivity Biases in Wage Comparisons," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(6), pages 1145-55, Nov.-Dec..
  8. Forsund, Finn R. & Lovell, C. A. Knox & Schmidt, Peter, 1980. "A survey of frontier production functions and of their relationship to efficiency measurement," Journal of Econometrics, Elsevier, Elsevier, vol. 13(1), pages 5-25, May.
  9. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, Elsevier, vol. 3(2), pages 156-168, June.
  10. Greene, William H., 1980. "Maximum likelihood estimation of econometric frontier functions," Journal of Econometrics, Elsevier, Elsevier, vol. 13(1), pages 27-56, May.
  11. Kenneth Burdett & Dale T. Mortensen, 1977. "Labor Supply Under Uncertainty," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 297, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. P. Diamond & E. Maskin, 1978. "An Equilibrium Analysis of Search and Breach of Contract, I," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 221, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Amemiya, Takeshi, 1973. "Regression Analysis when the Dependent Variable is Truncated Normal," Econometrica, Econometric Society, Econometric Society, vol. 41(6), pages 997-1016, November.
  14. Christopher J. Flinn & James J. Heckman, 1982. "Models for the Analysis of Labor Force Dynamics," NBER Working Papers, National Bureau of Economic Research, Inc 0857, National Bureau of Economic Research, Inc.
  15. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, Elsevier, vol. 7(2), pages 188-209, February.
  16. Kiefer, Nicholas M & Neumann, George R, 1981. "Individual Effects in a Nonlinear Model: Explicit Treatment of Heterogeneity in the Empirical Job-Search Model," Econometrica, Econometric Society, Econometric Society, vol. 49(4), pages 965-79, June.
  17. Rothschild, Michael, 1973. "Models of Market Organization with Imperfect Information: A Survey," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 81(6), pages 1283-1308, Nov.-Dec..
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