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Estimating Mobility Rates in Search Models with Initial Condition Problems

Listed author(s):
  • Gadi Barlevy

    (Federal Reserve Bank of Chicago)

  • H. N. Nagaraja

    (Ohio State University)

Previous empirical work on job search has proposed different approaches to estimating mobility rates assumed in models of search. However, these methods either only work for specific models of wage determination, or else require that we know the initial distribution of productivity for workers in our sample. In this paper we show it is possible to estimate mobility rates without having to restrict attention to models in which wages are constant over the course of a job or to assume that the initial distribution of productivity is known. More generally, the approach we propose allows us to freely estimate one degree of unobserved heterogeneity, be it in initial conditions or mobility rates. Applying our results to data from the NLSY suggests that that the theoretical restrictions on the initial distribution of productivity implied by the standard model can overstate the extent of frictions to upward mobility. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2009.10.012
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 13 (2010)
Issue (Month): 4 (October)
Pages: 780-799

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Handle: RePEc:red:issued:08-112
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  1. Pieter Gautier & Coen Teulings, 2005. "How Large are Search Frictions," 2005 Meeting Papers 175, Society for Economic Dynamics.
  2. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage bargaining with on-the-job search: theory and evidence," Sciences Po publications info:hdl:2441/dc0ckec3fcb, Sciences Po.
  3. Audra J, Bowlus & Jean-Marc Robin, 2002. "Twenty Years of Rising Inequality in US Lifetime Labor Income Values," Working Papers 2002-58, Centre de Recherche en Economie et Statistique.
  4. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  5. Pieter A. Gautier & Coen N. Teulings & Aico van Vuuren, 2005. "On-the-Job Search and Sorting," Tinbergen Institute Discussion Papers 05-070/3, Tinbergen Institute.
  6. Grégory Jolivet & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "The Empirical Content of the Job Search Model: Labor Mobility and Wage Distributions in Europe and the U.S," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00308803, HAL.
  7. Gadi Barlevy, 2008. "Identification of Search Models using Record Statistics," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 29-64.
  8. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Sciences Po publications info:hdl:2441/dc0ckec3fcb, Sciences Po.
  9. Gadi Barlevy & H. N. Nagaraja, 2005. "Characterizations in a random record model with a non-identically distributed initial record," Working Paper Series WP-05-05, Federal Reserve Bank of Chicago.
  10. Ridder, Geert & van den Berg, Gerard J., 2003. "Measuring Labor Market Frictions: A Cross-Country Comparison," IZA Discussion Papers 814, Institute for the Study of Labor (IZA).
  11. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 88-97, January.
  12. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-273, May.
  13. Eckstein, Zvi & van den Berg, Gerard J, 2004. "Empirical Labour Search: A Survey," CEPR Discussion Papers 4199, C.E.P.R. Discussion Papers.
  14. Christopher J. Flinn, 2002. "Labour Market Structure and Inequality: A Comparison of Italy and the U.S," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 611-645.
  15. James J. Heckman & Christopher J. Flinn, 1982. "New Methods for Analyzing Structural Models of Labor Force Dynamics," NBER Working Papers 0856, National Bureau of Economic Research, Inc.
  16. Bunge, J. A. & Nagaraja, H. N., 1991. "The distributions of certain record statistics from a random number of observations," Stochastic Processes and their Applications, Elsevier, vol. 38(1), pages 167-183, June.
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