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Equilibrium Search Models and the Transition from School to Work

Author

Listed:
  • Bowlus, Audra J
  • Kiefer, Nicholas M
  • Neumann, George R

Abstract

This paper applies the Burdett-Mortensen (1998) equilibrium search model to study the school to work transitions of U.S. high school graduates. We consider the case of discrete firm heterogeneity and provide a computational method to obtain the MLE. Our results show that unemployed blacks receive fewer offers than whites and employed blacks are more likely to lose their jobs. Importantly, employed blacks and whites receive job offers at the same rate. Assigning the whites' search parameters to the blacks and re-solving reveals that 75 percent of the observed wage differential is explained by the job destruction rate differences.

Suggested Citation

  • Bowlus, Audra J & Kiefer, Nicholas M & Neumann, George R, 2001. "Equilibrium Search Models and the Transition from School to Work," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 317-343, May.
  • Handle: RePEc:ier:iecrev:v:42:y:2001:i:2:p:317-43
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    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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