DP4515 Labour Market Prospects, Search Intensity and Transition from College to Work

Author(s): Peter Berkhout, Bas van der Klaauw, Aico van Vuuren
Publication Date: August 2004
Keyword(s): business cycle, return-to-work experience, structural estimation
JEL(s):
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=4515

In this Paper, we develop a structural model for the job search behaviour of students entering the labour market. The model includes endogenous search effort and on-the-job searches. Since students usually do not start a regular job before graduation but start job searches earlier, our model is non-stationary even if all structural parameters are constant. The model explains the common finding that a substantial share of individuals start working immediately upon graduation. We estimate the model using a unique data set of individuals who completed undergraduate education in the Netherlands between 1995 and 2001. Our estimation results show that a 1% decrease in unemployment rate increases wage offers by 3%, that there are substantial returns to work experience and that individuals devote less effort to job search than optimal. Employment rates at graduation could be increased from 40% to 65% if all individuals start job searches 6 month prior to graduation.