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Title: Job Search with Nonparticipation

Author(s): Paul Frijters and Bas van der Klaauw

Publication Date: June 2003

Keyword(s): duration dependence, endogenous nonparticipation, heterogeneity, non-stationary job search, simulated maximum likelihood and structural empirical analysis

Programme Area(s): Labour Economics

Abstract: In a non-stationary job search model we allow unemployed workers to have a permanent option to leave the labour force. Transitions into nonparticipation occur when reservation wages drop below the utility of being nonparticipant. Taking account of these transitions allows the identification 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 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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Bibliographic Reference

Frijters, P and van der Klaauw, B. 2003. 'Job Search with Nonparticipation'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3922