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A Job Ladder Model with Stochastic Employment Opportunities

Author

Listed:
  • Bradley, Jake

    (University of Nottingham)

  • Gottfries, Axel

    (University of Edinburgh)

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. Structurally estimating the model, the parameters are significantly different from the stock-flow or the job ladder model. Further, the estimated parameters governing workers search behavior are found to be consistent with recent survey evidence documented in Faberman et al. (2016). 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, the standard model is unable to generate the decline in the job finding rate and starting wage with duration of unemployment, both of which are present in our data.

Suggested Citation

  • Bradley, Jake & Gottfries, Axel, 2018. "A Job Ladder Model with Stochastic Employment Opportunities," IZA Discussion Papers 11767, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp11767
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    Cited by:

    1. Forsythe, Eliza & Wu, Jhih-Chian, 2021. "Explaining Demographic Heterogeneity in Cyclical Unemployment," Labour Economics, Elsevier, vol. 69(C).
    2. Bradley, Jake, 2022. "Worker-Firm Screening and the Business Cycle," IZA Discussion Papers 15017, Institute of Labor Economics (IZA).
    3. Jake Bradley, 2020. "Worker-firm screening and the business cycle," Discussion Papers 2020/11, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).

    More about this item

    Keywords

    wage posting; wage dispersion; on-the-job search; stock-flow;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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