IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/0857.html
   My bibliography  Save this paper

Models for the Analysis of Labor Force Dynamics

Author

Listed:
  • Christopher J. Flinn
  • James J. Heckman

Abstract

This paper presents new econometric methods for the empirical analysis of individual labor market histories. The techniques developed here extend previous work on continuous time models in four ways: (1) A structural economic interpretation of these models is presented. (2) Time varying explanatory variables are introduced into the analysis in a general way. (3) Unobserved heterogeneity components are permitted to be correlated across spells. (4) A flexible model of duration dependence is presented that accommodates many previous models as a special case and that permits tests among competing specifications within a unified framework. We contrast our methods with more conventional discrete time and regression procedures. The parameters of continuous time models are in- variant to the sampling time unit used to record observations. Problems plague the regression approach to analyzing duration data which do not plague the likelihood approach advocated in this paper. The regression approach cannot be readily adopted to accommodate time varying explanatory variables. The functional forms of regression functions depend on the time paths of the explanatory variables. Ad hoc solutions to this problem can make exogenous variables endogenous to the model and so can induce simultaneous equations bias. Two sets of empirical results are presented. A major conclusion of the first analysis is that the discrete time Markov model widely used in labor market analysis is inconsistent with the data. The second set of empirical results is a test of the hypothesis that "unemployment" and "out of the labor force" are behaviorally different labor market states. Contrary to recent claims, we find that they are separate states for our sample of young men.

Suggested Citation

  • Christopher J. Flinn & James J. Heckman, 1982. "Models for the Analysis of Labor Force Dynamics," NBER Working Papers 0857, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0857
    Note: LS
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w0857.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kenneth Burdett & Dale T. Mortensen, 1977. "Labor Supply Under Uncertainty," Discussion Papers 297, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Kiefer, Nicholas M & Neumann, George R, 1979. "An Empirical Job-Search Model, with a Test of the Constant Reservation-Wage Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 89-107, February.
    3. Kim B. Clark & Lawrence H. Summers, 1982. "The Dynamics of Youth Unemployment," NBER Chapters, in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 199-234, National Bureau of Economic Research, Inc.
    4. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
    5. Lucas, Robert E, Jr, 1978. "Unemployment Policy," American Economic Review, American Economic Association, vol. 68(2), pages 353-357, May.
    6. Burton Singer & Seymour Spilerman, 1976. "Some Methodological Issues in the Analysis of Longitudinal Surveys," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 447-474, National Bureau of Economic Research, Inc.
    7. Stephen T. Marston, 1976. "Employment Instability and High Unemployment Rates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(1), pages 169-210.
    8. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    9. S. C. Salop, 1973. "Systematic Job Search and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(2), pages 191-201.
    10. Joanne Salop & Steven Salop, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 619-627.
    11. Gronau, Reuben, 1971. "Information and Frictional Unemployment," American Economic Review, American Economic Association, vol. 61(3), pages 290-301, June.
    12. Joanne Salop & Steven C. Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers 80, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:eee:labchp:v:2:y:1986:i:c:p:849-919 is not listed on IDEAS
    2. Dohmen, Thomas J., 2004. "Performance, seniority, and wages: formal salary systems and individual earnings profiles," Labour Economics, Elsevier, vol. 11(6), pages 741-763, December.
    3. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    4. Levine, David I, 1993. "Worth Waiting For? Delayed Compensation, Training, and Turnover in the United States and Japan," Journal of Labor Economics, University of Chicago Press, vol. 11(4), pages 724-752, October.
    5. Jeremy T. Fox, 2010. "Estimating the Employer Switching Costs and Wage Responses of Forward-Looking Engineers," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 357-412, April.
    6. Michael Waldman, 1990. "A Signalling Explanation for Seniority Based Promotions and Other Labor Market Puzzles," UCLA Economics Working Papers 599, UCLA Department of Economics.
    7. Edward P. Lazear, 1995. "Personnel Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121883, December.
    8. John Haltiwanger & Michael Waldman, 1984. "Insurance Aspects of Labor Market Contracting: An Overview," UCLA Economics Working Papers 348, UCLA Department of Economics.
    9. Pinheiro, Roberto & Visschers, Ludo, 2015. "Unemployment risk and wage differentials," Journal of Economic Theory, Elsevier, vol. 157(C), pages 397-424.
    10. Marianna Kudlyak & Damba Lkhagvasuren & Roman Susuyev, 2012. "Sorting by Skill over the Course of Job Search," Working Papers 12011, Concordia University, Department of Economics, revised 18 Apr 2012.
    11. David N. Margolis, 1996. "Cohort Effects and Returns to Seniority in France," Annals of Economics and Statistics, GENES, issue 41-42, pages 443-464.
    12. Richard Prisinzano, 2000. "Investigation of the Matching Hypothesis," Journal of Sports Economics, , vol. 1(3), pages 277-298, August.
    13. Harry J. Holzer, 1986. "Black Youth Nonemployment: Duration and Job Search," NBER Chapters, in: The Black Youth Employment Crisis, pages 23-73, National Bureau of Economic Research, Inc.
    14. Kawaguchi, Daiji, 2003. "Human capital accumulation of salaried and self-employed workers," Labour Economics, Elsevier, vol. 10(1), pages 55-71, February.
    15. William J. Carrington & Bruce Fallick, 2014. "Why Do Earnings Fall with Job Displacement?," Working Papers (Old Series) 1405, Federal Reserve Bank of Cleveland.
    16. Jacob Mincer, 1989. "Job Training: Costs, Returns, and Wage Profiles," NBER Working Papers 3208, National Bureau of Economic Research, Inc.
    17. Canegallo, Claudia, 1999. "Funzionamento del mercato del lavoro in presenza di informazione asimmetrica. Una rassegna della letteratura," POLIS Working Papers 8, Institute of Public Policy and Public Choice - POLIS.
    18. Statt, A.L., 1998. "Great Prospects: Employer Provided Training as a Credible Screening Device," Working Papers Series 9802, University of Stirling, Division of Economics.
    19. repec:eee:labchp:v:2:y:1986:i:c:p:789-848 is not listed on IDEAS
    20. Lin, Chung-cheng, 2004. "Bonding, shirking and adverse selection," Economic Modelling, Elsevier, vol. 21(3), pages 545-560, May.
    21. Charles T. Carlstrom, 1989. "Turnover, wages, and adverse selection," Economic Review, Federal Reserve Bank of Cleveland, vol. 25(Q I), pages 18-28.
    22. Mincer, Jacob, 1997. "The Production of Human Capital and the Life Cycle of Earnings: Variations on a Theme," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 26-47, January.
    23. Pakes, Ariel & Nitzan, Shmuel, 1983. "Optimum Contracts for Research Personnel, Research Employment, and the Establishment of "Rival" Enterprises," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 345-365, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0857. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.