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Evaluating Search and Matching Models Using Experimental Data

  • Lise, Jeremy

    ()

    (Queen's University)

  • Seitz, Shannon

    ()

    (Queen's University)

  • Smith, Jeffrey A.

    ()

    (University of Michigan)

This paper introduces an innovative test of search and matching models using the exogenous variation available in experimental data. We take an off-the-shelf Pissarides matching model and calibrate it to data on the control group from a randomized social experiment. We then simulate a program group from a randomized experiment within the model. As a measure of the performance of the model, we compare the outcomes of the program groups from the model and from the randomized experiment. We illustrate our methodology using the Canadian Self-Sufficiency Project (SSP), a social experiment providing a time limited earnings supplement for Income Assistance recipients who obtain full time employment within a 12 month period. We find two features of the model are consistent with the experimental results: endogenous search intensity and exogenous job destruction. We find mixed evidence in support of the assumption of fixed hours of labor supply. Finally, we find a constant job destruction rate is not consistent with the experimental data in this context.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1717.

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Length: 47 pages
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1717
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  1. Finn E. Kydland & Edward C. Prescott, 1994. "The computational experiment: an econometric tool," Staff Report 178, Federal Reserve Bank of Minneapolis.
  2. Jeremy Lise & Shannon Seitz & Jeffrey Smith, 2003. "Equilibrium Policy Experiments and the Evaluation of Social Programs," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20032, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  3. Michael P. Keane & Kenneth I. Wolpin, 2007. "Exploring The Usefulness Of A Nonrandom Holdout Sample For Model Validation: Welfare Effects On Female Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1351-1378, November.
  4. Harold L. Cole & Richard Rogerson, 1996. "Can the Mortonson-Pissarides matching model match the business cycle facts?," Staff Report 224, Federal Reserve Bank of Minneapolis.
  5. LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, vol. 76(4), pages 604-20, September.
  6. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
  7. Patrick Bajari & Ali Hortacsu, 2003. "Are Structural Estimates of Auction Models Reasonable? Evidence from Experimental Data," Working Papers 03002, Stanford University, Department of Economics.
  8. Card, D. & Michalopoulos, C. & Robins, P.K., 2001. "Measuring Wage Growth Among Former Welfare Recipients," Papers 2001-5, Gouvernement du Canada - Human Resources Development.
  9. Lars Peter Hansen & James J. Heckman, 1996. "The Empirical Foundations of Calibration," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 87-104, Winter.
  10. Bent Jesper Christensen & Rasmus Lentz & Dale T. Mortensen & George R. Neumann & Axel Werwatz, 2003. "On the Job Search and the Wage Distribution," CAM Working Papers 2004-09, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  11. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  12. David Card & Dean R. Hyslop, 2005. "Estimating the Effects of a Time-Limited Earnings Subsidy for Welfare-Leavers," Econometrica, Econometric Society, vol. 73(6), pages 1723-1770, November.
  13. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
  14. Yashiv, Eran, 2006. "Evaluating the performance of the search and matching model," European Economic Review, Elsevier, vol. 50(4), pages 909-936, May.
  15. Connolly, Helen & Gottschalk, Peter T., 2004. "Do Earnings Subsidies Affect Job Choice?," IZA Discussion Papers 1322, Institute for the Study of Labor (IZA).
  16. Carl Davidson & Stephen A. Woodbury, 1990. "The Displacement Effect of Reemployment Bonus Programs," Upjohn Working Papers and Journal Articles 90-02, W.E. Upjohn Institute for Employment Research.
  17. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  18. Lin, Zhengxi, 1998. "Employment Insurance in Canada: Recent Trends and Policy Changes," Analytical Studies Branch Research Paper Series 1998125e, Statistics Canada, Analytical Studies Branch.
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