Job Search with Nonparticipation
Paul Frijters
Bas van der KlaauwEconomic Journal 116, 45-83 (2006)
Abstract
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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Last updated: January 26, 2006.