Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2003:18: Empircial labor search models: A survey

Zwi Eckstein () and Gerard J van den Berg ()
Additional contact information
Zwi Eckstein: Tel Aviv University, The University of Minnesota, CEPR
Gerard J van den Berg: Free University Amsterdam, Tinbergen Institute, IFAU, CEPR

Abstract: This paper surveys the existing empirical research that uses search theory to empirically analyze labor supply questions in a structural framework, using data on individual labor 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 labor market where the search for a job involves dynamic decision making under uncertainity. It can be specialized to be in agreement with most published research using labor 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: Labor search models

JEL-codes: J21; J31; J41; J42

42 pages, September 17, 2003

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