Working Paper: CEPR ID: DP4199
Authors: Zvi Eckstein; Gerard J. van den Berg
Abstract: This Paper surveys the existing empirical research that uses search theory to analyse empirically labour supply questions in a structural framework, using data on individual labour market transitions and durations, wages, and individual characteristics. The starting points of the literature are the Mincerian earnings function, Heckman's classic selection model, and dynamic optimization theory. We develop a general framework for the labour market where the search for a job involves dynamic decision-making under uncertainty. It can be specialized to be in agreement with most published research using labour search models. We discuss estimation, policy evaluation with the estimated model, equilibrium model versions, and the decomposition of wage variation into factors due to heterogeneity of various model determinants as well as search frictions themselves. We summarize the main empirical conclusions.
Keywords: empirical labor search; search theory; labor supply; unemployment; wage dispersion
JEL Codes: C40; D80; J21; J31; J41; J42; J60
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| search theory (C78) | unemployment durations (J64) |
| search theory (C78) | wage dispersion (J31) |
| search frictions (F12) | labor market outcomes (J48) |
| individual labor market data (J20) | identification of determinants of agents' decision problems (D91) |
| decomposition of wage variation (J31) | insights into factors influencing wage disparities (J31) |
| evaluation of labor market policies (J48) | understanding implications of policy changes on labor market dynamics (J48) |