JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. University of Wisconsin Press andThe Board of Regents of the University of Wisconsin System are collaborating with JSTOR to digitize, preserve and extend access to The Journal of Human Resources. ABSTRACT This paper develops and applies a method for estimating workers' marginal willingess to pay for job attributes when workers' job choices are characterized by imperfect information and labor market search. As an application, this paper analyzes the job durations of white males using data from the National Longitudinal Survey, Youth Cohort and the Dictionary of Occupational Titles. Estimates of workers' willingness to pay derived from the job duration model are compared with those derived from an hedonic wage model. I. IntroductionThe theory of equalizing differences, or compensating wage differentials, provides the analytical framework for estimating workers' marginal willingness to pay (MWP) for job attributes. One drawback of this theory is that it presumes a world of static optimization. Labor markets, however, are generally not characterized by static behavior. For example, using CPS data from 1978-83, Ureta (1992) calculates that 40.3 percent of all men and 45.9 percent of all women leave their jobs within five years. Further, most workers who quit their jobs move to new jobs without an intervening period of nonemployment (Mattila 1974). These facts have encouraged modern analyses of labor supply to adopt dynamic All use subject to JSTOR Terms and Conditions 912 The Journal of Human Resources models of the turnover process. The theory of labor market search has provided the framework for much of this work (Devine and Kiefer 1990).Despites these advances, there has been little appreciation of the importance of these developments for the static theory of equalizing differences.1 According to this theory, an equilibrium locus of wage and job characteristics exists and can be estimated by an appropriately specified wage equation. The coefficients of the right-hand-side job characteristics are then interpreted as the (implicit or hedonic) prices of these attributes. Alternatively, they can be interpreted as workers' MWP for these job characteristics. The effect of underlying wage dispersion, if explicitly acknowledged at all, is generally presumed to be controlled for by the inclusion of a disturbance term in the wage equation. The assumption is that this disturbance term is uncorrelated with the right-hand-side regressors. However, this assumption is generally not warranted.In a recent paper, Hwang et al. (1993) demonstrate that conventional estimates of the marginal willingness to pay for a desirable job attribute are biased down within the framework of an equilibrium model of...

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