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Improving Estimation of Labor Market Disequilibrium through Inclusion of Shortage Indicators

Author

Listed:
  • Matthew Baird

    () (RAND Corporation)

  • Lindsay Daugherty

    () (RAND Corporation)

  • Krishna Kumar

    () (RAND Corporation)

Abstract

While economic studies assume that labor markets are in equilibrium, there may be specialized labor markets likely in disequilibrium. We develop a new methodology to improve the estimation of a reduced form disequilibrium model from the existing models by incorporating survey-based shortage indicators into the model and estimation. Our shortage indicator informed disequilibrium model includes as a special case the foundational model of Maddala and Nelson (1974), off of which we build. We demonstrate the gains in information provided by the methodology. We show how the model can be implemented by applying it to the market for anesthesiologists in the United States using two waves of surveys of anesthesiologists. In this application, we find that our new shortage indicator informed disequilibrium model fits the data better than the Maddala and Nelson model, as well as performing better with regards to out-of-sample predictive power.

Suggested Citation

  • Matthew Baird & Lindsay Daugherty & Krishna Kumar, 2017. "Improving Estimation of Labor Market Disequilibrium through Inclusion of Shortage Indicators," CINCH Working Paper Series 1701, Universitaet Duisburg-Essen, Competent in Competition and Health.
  • Handle: RePEc:duh:wpaper:1701
    as

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    File URL: https://cinch.uni-due.de/fileadmin/content/research/workingpaper/1607_CINCH-Series-Baird.pdf
    File Function: First version, 2017
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    References listed on IDEAS

    as
    1. Lee, Lung-Fei, 1997. "A smooth likelihood simulator for dynamic disequilibrium models," Journal of Econometrics, Elsevier, vol. 78(2), pages 257-294, June.
    2. Luc Bauwens & Michel Lubrano, 2007. "Bayesian Inference in Dynamic Disequilibrium Models: An Application to the Polish Credit Market," Econometric Reviews, Taylor & Francis Journals, vol. 26(2-4), pages 469-486.
    3. Todd Hubbs & Todd Kuethe, 2017. "A disequilibrium evaluation of public intervention in agricultural credit markets," Agricultural Finance Review, Emerald Group Publishing, vol. 77(1), pages 37-49, May.
    4. Gourieroux,Christian, 2000. "Econometrics of Qualitative Dependent Variables," Cambridge Books, Cambridge University Press, number 9780521589857, April.
    5. Blaise Melly & Patrick A. Puhani, 2013. "Do Public Ownership And Lack Of Competition Matter For Wages And Employment? Evidence From Personnel Records Of A Privatized Firm," Journal of the European Economic Association, European Economic Association, vol. 11(4), pages 918-944, August.
    Full references (including those not matched with items on IDEAS)

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