Working Paper: NBER ID: w0856
Authors: Christopher J. Flinn; James J. Heckman
Abstract: This paper takes a first step toward developing econometric models for the structural analysis of labor force dynamics. Our analysis is presented in continuous time, although most of the points raised here can be applied to discrete time models. We show that in previous attempts to estimate "structural" models of job search, a key source of information necessary to identify certain structural parameters has been neglected. We discuss the conditions under which structural search models can be estimated. In particular, the wage offer distribution must be recoverable -- i.e., it must be the case that the parameters of the untruncated wage offer distribution be estimable from the truncated accepted wage distribution. The wage offer distribution must be assumed to belong to a parametric family. Estimates of structural parameters are shown to be sensitive to the distributional assumption made. A partial equilibrium two state model of employment dynamics is estimated, using data from the National Longitudinal Survey of Young Men. We find employment and nonemployment rates implied by the structural parameter estimates to be generally consistent with those observed for the population of young males.
Keywords: labor force dynamics; structural models; job search; econometric analysis
JEL Codes: C51; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wage offer distribution assumptions (J31) | identification of structural parameters (C51) |
| recoverability condition (G33) | identification of structural parameters (C51) |
| wage offer distribution assumptions (J31) | parameters of untruncated wage offer distribution (J31) |
| maximum likelihood estimators nonregular (C51) | asymptotic distribution of estimators (C51) |