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Bayesian inference in models based on equilibrium search theory

The equilibrium search model represents a substantial advance over previous models of job search, but its empirical performance fails in some crucial ways. Hence, flexible extensions are called for. In this paper, we consider three such extensions in areas where Bayesian methods can be used to great advantage. These are i) A specification where Bayesian priors are used to center a model over the restrictions implied by economic theory; ii) A model involving a nonlinear prediction function where a closed form expression for the likelihood function does not exist; and iii) A model which allows for unobserved heterogeneity. We show how posterior simulation methods can be used for empirical analysis for all three models. The paper includes an empirical exercise involving the school-to-work transitions of Canadian and U.S. school leavers.

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Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 12.

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Length: 29
Date of creation: Aug 1999
Date of revision:
Handle: RePEc:edn:esedps:12
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  1. Koning, Pierre & Ridder, Geert & van den Berg, Gerard J, 1995. "Structural and Frictional Unemployment in an Equilibrium Search Model with Heterogeneous Agents," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(S), pages S133-51, Suppl. De.
  2. Eckstein, Z. & Wolpin, K.I., 1992. "Duration to First Job and the Return to Schooling : Estimates form a Search -Matching Model," Papers 13-92, Tel Aviv.
  3. Kiefer, Nicholas M & Steel, Mark F J, 1998. "Bayesian Analysis of the Prototypal Search Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 178-86, April.
  4. Mortensen, D.T., 1998. "Equilibrium Unemployment with Wage Posting: Burdett-Mortensen Meet Pissarides," Papers 98-14, Centre for Labour Market and Social Research, Danmark-.
  5. John Geweke, 1999. "Using simulation methods for bayesian econometric models: inference, development,and communication," Econometric Reviews, Taylor & Francis Journals, vol. 18(1), pages 1-73.
  6. Lancaster, Tony, 1997. "Exact Structural Inference in Optimal Job-Search Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 165-79, April.
  7. Rosholm, Michael & Svarer, Michael, 2000. "Wages, Training and Job Turnover in a Search-Matching Model," IZA Discussion Papers 223, Institute for the Study of Labor (IZA).
  8. Ferrall, Christopher, 1997. "Unemployment Insurance Eligibility and the School-to-Work Transition in Canada and the United States," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 115-29, April.
  9. Bontemps, Christian & Robin, Jean-Marc & Van den Berg, Gerard J, 1999. "An Empirical Equilibrium Job Search Model with Search on the Job and Heterogeneous Workers and Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 1039-74, November.
  10. Gerard J. van den Berg, 1998. "Empirical Inference with Equilibrium Search Models of the Labor Market," Tinbergen Institute Discussion Papers 98-089/3, Tinbergen Institute.
  11. van den Berg, Gerard J, 1999. "Empirical Inference with Equilibrium Search Models of the Labour Market," Economic Journal, Royal Economic Society, vol. 109(456), pages F283-306, June.
  12. Christensen, Bent Jesper & Kiefer, Nicholas M., 1997. "Inference in non-linear panel models with partially missing observations The case of the equilibrium search model," Journal of Econometrics, Elsevier, vol. 79(2), pages 201-219, August.
  13. Berg, G.J. & Ridder, G., 1993. "An empirical equilibrium search model of the labour market," Serie Research Memoranda 0039, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
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