Non-Stationary Job Search with Firing: A Structural Estimation

Abstract

This paper modi…es Van den Berg's (1990) nonstationary model of search, considering the existence of a …ring probability. The presence of …ring makes unemployed workers lower their reservation wage because of the entitlement e¤ect embodied in accepting a job o¤er. In this nonstationary environment, reservation wages have a stronger time-dependence than without …ring. The model is estimated structurally using Spanish data for the period 1985-1996. The main …nding from this estimation is that, although the decrease in reservation wages is the main determinant of the change in the hazard rate for the …rst four months, later on, the only e¤ect comes from the job o¤er arrival rate, given that acceptance probabilities are roughly equal to one. These results are obtained with grouped duration and re-employment wage data, and controlling for the presence of unobserved heterogeneity in the o¤er arrival rate.

Job separation in a non‐stationary search model: a structural estimation to evaluate alternative unemployment insurance systems

“…9 9 That is, the job can be interrupted for any exogenous reason, such as firing or quitting. This probability can also be a function of accumulated tenure (see García‐Pérez, 1998). However, given that we have no employment duration data, we will use the expression in that paper for δ i , the ‘mean separation rate’, which takes into consideration the evolution of the separation probability from the beginning of the employment spell to infinity. …”

“…13 13 This is a consequence of discrete time. In continuous time (see García‐Pérez, 1998), this acceptance probability would simply be $1 - F_{i}(w_{i}^{*}(t), t)$ . …”