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Job Search with Nonparticipation

Author

Listed:
  • Paul Frijters
  • Bas van der Klaauw

Abstract

In a non-stationary job search model we allow unemployed workers to have a permanent option to leave the labour 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. Copyright 2006 Royal Economic Society.

Suggested Citation

  • Paul Frijters & Bas van der Klaauw, 2006. "Job Search with Nonparticipation," Economic Journal, Royal Economic Society, vol. 116(508), pages 45-83, January.
    • Handle: RePEc:ecj:econjl:v:116:y:2006:i:508:p:45-83
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    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - 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

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