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Job Search with Nonparticipation

Listed author(s):
  • Frijters, Paul

    ()

    (London School of Economics)

  • van der Klaauw, Bas

    ()

    (Vrije Universiteit Amsterdam)

In a non-stationary job search model we allow unemployed workers to have a permanent option to leave the labor force. Transitions into nonparticipation occur when reservation wages drop below the utility of being nonparticipant. Taking account of these transitions allows the identification of duration dependence in the job offer arrival rate and the wage offer distribution. We estimate the structural model with individual data from the German Socio- Economic Panel and use simulated maximum likelihood. The results show that the presence of significant negative duration dependence in the wage offer distribution causes reservation wages to decrease. The rate at which job offers arrive is constant over the unemployment duration. These findings provide micro evidence that the job search environment of unemployed workers is non-stationary because of loss of skills.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1407.

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Length: 49 pages
Date of creation: Nov 2004
Publication status: published in: Economic Journal, 2006, 116 (508), 45-83
Handle: RePEc:iza:izadps:dp1407
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  7. van den Berg, G., 1988. "Search behaviour, transitions to nonparticipation and the duration of unemployment," Research Memorandum 01393d23-5b79-44ba-b971-d, Tilburg University, School of Economics and Management.
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  20. Pakes, Ariel S, 1986. "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks," Econometrica, Econometric Society, vol. 54(4), pages 755-784, July.
  21. C Bean, 1992. "European Unemployment: A Survey," CEP Discussion Papers dp0071, Centre for Economic Performance, LSE.
  22. Bloemen, H.G., 1992. "Job Search Theory, Labour Supply and Unemployment Duration," Papers 9250, Tilburg - Center for Economic Research.
  23. Kenneth Burdett & Nicholas M. Kiefer & Dale T. Mortensen & George R. Neumann, 1984. "Earnings, Unemployment, and the Allocation of Time Over Time," Review of Economic Studies, Oxford University Press, vol. 51(4), pages 559-578.
  24. Zvi Eckstein & Kenneth I. Wolpin, 1989. "The Specification and Estimation of Dynamic Stochastic Discrete Choice Models: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 562-598.
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