Theory of job search [Elektronische Ressource] : unemployment participation tradeoff and spatial search with asymmetric changes of the wage distribution / vorgelegt von Alisher Aldashev

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• Publié par: universitat_regensburg
• Publié le: 01 janvier 2008
• Nombre de lectures: 9
• Langue: English

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Theory of Job Search.
Unemployment-Participation Tradeoff and
Spatial Search with Asymmetric Changes
of the Wage Distribution
Dissertation zur Erlangung des Grades eines Doktors
der Wirtschaftswissenschaften
eingereicht an der Wirtschaftswissenschaftlichen Fakulta¨t
der Universita¨t Regensburg
vorgelegt von
Alisher Aldashev
Betreuer:
Prof. Dr. Joachim Mo¨ller
Prof. Dr. Lutz Arnold
Datum der Disputation 5. Juli 2007Theory of Job Search.
Unemployment-Participation Tradeoff and Spatial
Search with Asymmetric Changes of the Wage
Distribution
Alisher Aldashev
ZEW, Mannheim
Mannheim, November 14, 2007Contents
1 Introduction 1
2 Review of Literature 6
2.1 Models with Constant Wages (Urn Models) . . . . . . . . . . . . . . . . . . . 8
2.1.1 Full Equilibrium Model with Employment Agency . . . . . . . . . . . 8
2.1.2 Equilibrium Unemployment Rate and Employment Duration . . . . . . 11
2.1.3 Spatial Search with Constant Wages . . . . . . . . . . . . . . . . . . . 13
2.2 Exogenous Wage Dispersion . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.2.1 Single Wage Offer Model, Discrete Time . . . . . . . . . . . . . . . . 14
2.2.2 Multiple Wage Offer Model, Continuous Time . . . . . . . . . . . . . 16
2.3 Endogenous Wage Dispersion . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.3.1 Wage Dispersion Due to Worker Heterogeneity . . . . . . . . . . . . . 18
2.3.2 Equilibrium Wage Dispersion with Identical Workers . . . . . . . . . . 24
2.4 Conclusion and Empirical Relevance . . . . . . . . . . . . . . . . . . . . . . . 26
3 Nonstationarity in the Theory of Job Search and Withdrawals from the Labor
Market 28
3.1 Theoretical Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.2 Unemployment Participation Tradeoff . . . . . . . . . . . . . . . . . . . . . . 30
3.3 Simulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
i4 Empirical Estimation of Duration Models 35
4.1 Estimation Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.1.1 Parametric Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.1.2 Proportional Hazard Specification and Semiparametric Estimation . . . 38
4.1.3 Competing Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.1.4 Nonparametric Methods: Kaplan-Meier Product-Limit Estimator . . . 40
4.2 The Kaplan-Meier Estimator and Withdrawals from the Labor Market . . . . . 41
5 Spatial Search Theory and Commuting 47
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.2 Bilocational Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.3 Maximal Acceptable Travel Cost . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.4 Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6 Empirical Estimation of a Commuting Model 58
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.2 Data and Descriptive Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.3 Clustering and Robust Variance Estimation . . . . . . . . . . . . . . . . . . . 62
6.4 Estimating the Poisson Model . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.5 Estimating the Negative Binomial Model . . . . . . . . . . . . . . . . . . . . . 67
6.6 Zero Inflated Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.7 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
7 Summary, Potential Drawbacks and Open Questions 79
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
A Formulae Derivation 90
A.1 Formulae from Section 2.1.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
A.2 Formulae from Section 2.2.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
iiA.3 Formulae from Section 2.2.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
A.4 Formulae from Section 2.3.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
A.5 Formulae from Section 3.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
A.6 Formulae from Section 4.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
A.7 Formulae from Section 5.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
A.8 Proof of Proposition 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
A.9 Proof of Proposition 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
A.10 Proof of Proposition 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
A.11 Proof of Proposition 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
A.12 Data Used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
A.13 Maximal Acceptable Commuting Distance, Simulations . . . . . . . . . . . . . 105
A.14 Zero-inflated negative binomial estimation . . . . . . . . . . . . . . . . . . . . 107
A.15 Descriptive Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
A.16 Withdrawals from the Labor Market . . . . . . . . . . . . . . . . . . . . . . . 111
A.17 Alternative Specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
A.18 Software Used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
iiiPreface
This dissertation was written during my time as a doctorate student at the University of Regens-
burg and work on the project ”Flexibilita¨t der Lohnstruktur, Ungleichheit und Bescha¨ftigung -
Eine vergleichende Mikrodatenuntersuchung fu¨r die USA und Deutschland” (under supervision
of Prof. Dr. Mo¨ller), which is part of a greater project of the DFG ”Flexibilisierungspotenziale
bei heterogenen Arbeitsma¨rkten”.
I wish to thank Prof. Dr. Joachim Mo¨ller and Prof. Dr. Lutz Arnold for their supervision and
valuable comments and suggestions, which in my view helped to improve my thesis and added
much to its scientific value. I benefited greatly from the discussions at the econometrics semi-
nar and lunch seminar held at the University of Regensburg, especially with Dr. Jo¨rg Lingens,
Prof. Dr. emer. Walter Oberhofer, Prof. Dr. Rolf Tschernig (all University of Regensburg), Dr.
Johannes Ludsteck (IAB), Dr. Thomas Schreck (BulwienGesa AG, Mu¨nchen-Berlin). I also
wish to thank Prof. Bernd Fitzenberger, PhD (University of Freiburg) for his thorough com-
ments on one of my papers, which contributed much to this dissertation. I also enjoyed valuable
discussions with Prof. Dr. Wolfgang Franz, Melanie Arntz, Alfred Garloff (all ZEW), Dr. Ralf
Wilke (University of Leicester), Prof. Michael Burda, PhD (Humboldt University, Berlin). I
also wish to thank my new colleagues at ZEW for their help: Dr. Stephan Lothar Thomsen (for
his LaTeX expertise), Markus Clauss, Christian Go¨bel (for his tip on using Gnumeric).
Of course, this work would have never been possible without constant care and support of my
family: my parents and grandparents, my sister Aisulu. And last, but certainly not least, I am
indebted much to my dearest wife – Olga, not only for her help with the LaTeX formula editor,
but most importantly for her love and understanding during all these years.
ivChapter 1
Introduction
Information economics has already had a
profound effect on how we think about
economic policy, and are likely to have
an even greater influence in the future.
The world is, of course, more
complicated than our simple - or even
our more complicated models - would
suggest.
J. Stiglitz, Nobel Prize lecture,
December 8, 2001
Job search theory is a relatively young actor on the stage of economics and is an integral part
of a broader field of economics of information. The ideas about functioning of the markets
where information is costly to obtain were first enunciated by the Nobel Prize winner G. Stigler
in his pioneering work ”The Economics of Information” published in the Journal of Political
Economy in 1961. To explicate the very essence of what the economics of information and job
search in particular all about I refer to Stigler himself:
I propose on this occasion to address the same kinds of questions to an entirely
different market: the market for new ideas in economic science. Most economists
enter this market in new ideas, let me emphasize, in order to obtain ideas and meth-
ods for the applications they are making of economics to the thousand problems
with which they are occupied: these economists are not the suppliers of new ideas
but only demanders. Their problem is comparable to that of the automobile buyer:
to find a reliable vehicle. Indeed, they usually end up by buying a used, and there-
fore tested, idea. Those economists who seek to engage in research on the new
ideas of the science - to refute or confirm or develop or displace them - are in a
sense both buyers and sellers of new ideas. They seek to develop new ideas and
1persuade the science to accept them, but they also are following clues and promises
and explorations in the current or preceding ideas of the science. It is very costly
to enter this market: it takes a good deal of time and thought to explore a new idea
far enough to discover its promise or its lack of promise. The history of economics,
and I assume of every science, is strew