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Improving Estimation of Labor Market Disequilibrium Using Shortage Indicators, with an Application to the Market for Anesthesiologists

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  • Baird, Matthew

    (RAND)

  • Daugherty, Lindsay

    (RAND)

  • Kumar, Krishna B.

    (RAND)

Abstract

While economic studies often assume that labor markets are in equilibrium, there may be specialized labor markets that are 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). We demonstrate the gains in information provided by our methodology. We show how the model can be implemented by applying it to the market for anesthesiologists, a profession susceptible to disequilibrium. In this application, we find that our new disequilibrium model informed by a shortage indicator fits the data better than the Maddala-Nelson model, and has better out-of-sample predictive power.

Suggested Citation

  • Baird, Matthew & Daugherty, Lindsay & Kumar, Krishna B., 2019. "Improving Estimation of Labor Market Disequilibrium Using Shortage Indicators, with an Application to the Market for Anesthesiologists," IZA Discussion Papers 12129, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp12129
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    References listed on IDEAS

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    1. Kalist, David E. & Molinari, Noelle A. & Spurr, Stephen J., 2011. "Cooperation and conflict between very similar occupations: the case of anesthesia," Health Economics, Policy and Law, Cambridge University Press, vol. 6(2), pages 237-264, April.
    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. Laroque, Guy & Salanie, B, 1993. "Simulation-Based Estimation of Models with Lagged Latent Variables," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(S), pages 119-133, Suppl. De.
    4. Lee, Lung-Fei, 1997. "A smooth likelihood simulator for dynamic disequilibrium models," Journal of Econometrics, Elsevier, vol. 78(2), pages 257-294, June.
    5. 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.
    6. Gourieroux,Christian, 2000. "Econometrics of Qualitative Dependent Variables," Cambridge Books, Cambridge University Press, number 9780521589857, October.
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    Cited by:

    1. Horbach, Jens & Rammer, Christian, 2020. "Labor shortage and innovation," ZEW Discussion Papers 20-009, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    disequilibrium; labor demand; labor supply; shortage; maximum likelihood; health providers;
    All these keywords.

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General

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