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Testing optimality in job search models

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Abstract

This paper uses Bayesian techniques to compare three definitions of optimality for the basic job search model: the standard income-maximizing definition, an approximation to the standard definition, and a simple alternative. The important role of prior choice in these comparisons is illustrated. Using natural conjugate priors to represent hypothetical samples of data, we find that the simple alternative is preferred to the standard definition of optimality. However, using priors constructed from findings in the literature, we are able to find some evidence in favor of the standard definition of optimality.

Suggested Citation

  • John W. Schindler, 2001. "Testing optimality in job search models," International Finance Discussion Papers 710, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:710
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    References listed on IDEAS

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