A job ladder model with stochastic employment opportunities

Axel Gottfries, Jake Bradley

Research output: Working paper

Abstract

We set up a model with on-the-job search in which firms infrequently post vacancies for which workers occasionally apply. The model nests the standard job ladder and stock-flow models as special cases, while remaining analytically tractable and easy to estimate from standard panel data sets. The parameters from a structurally estimated model on US data are significantly different from either the restrictions imposed by a stock-flow or job ladder model. Further, the estimated parameters governing worker’s search behavior are found to be consistent with survey evidence. The search behavior implied by the standard job ladder model significantly understates the search option associated with employment (and thus underestimates the replacement ratio). Finally, our model, unlike standard models, is able to generate a decline in the job finding rate and starting wage with duration of unemployment, both of which are present in our data.
Original languageEnglish
PublisherIZA - Institute of Labor Economics
Pages1-60
Publication statusPublished - Aug 2018

Keywords

  • on-the-job search
  • wage dispersion
  • wage posting
  • stock-flow

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