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Job Search with Nonparticipation

  • Paul Frijters
  • Bas van der Klaau

    (School of Economics and Finance, Queensland University of Technology)

In a non-stationary job search model we allow unemployed workers to have a permanent option to leave the labor force. Transitions into non-participation occur when reservation wages drop below the utility of being nonparticipant. Taking account of these transitions allows the identication of the 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 signicant 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-stationairy because of loss of skills.

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File URL: http://www.bus.qut.edu.au/paulfrijters/documents/nonpart2.pdf
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Paper provided by School of Economics and Finance, Queensland University of Technology in its series Paul Frijters Discussion Papers with number 2003-3.

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Date of creation: 15 Jun 2003
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Handle: RePEc:qut:pfrijt:2003-3
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