A Structural Non-stationary Model of Job Search: Stigmatization of the Unemployed by Job Offers or Wage Offers ?

Stéfan Lollivier and Laurence Rioux
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Stéfan Lollivier: Crest
Laurence Rioux: Crest

No 2005-03, Working Papers from Center for Research in Economics and Statistics

Abstract: We develop a structural non-stationary model of job search in the fashion of van den Berg (1990).Nonstationarity comes from the duration-dependence in benefits, in the arrival rate of job offers, and in wageoffers. The model is then estimated using the French sample of the ECHP Survey (1994-2000). This data setprovides the variables required to identify the model (reservation wages, job offers arrival rate, accepted wagesand rejected wages) and allows to reconstruct the "true" monthly sequence of benefits for each unemployedworker. We find that duration-dependence in job offers is quite limited: the arrival rate of job offers is exactlythe same after two years of unemployment than at the beginning of the spell. Duration dependence in wageoffers is slightly more pronounced: wages are decreasing during the first two years of unemployment.Nevertheless the most important fall is observed at the beginning of the spell. We also find that the formeremployed in temporary jobs are more sensitive to duration than the other unemployed. Then we simulate theeffects, on the expected duration of unemployment, of four reforms of the unemployment compensation system:(A) a 14% increase in the amount of UI benefits, keeping unchanged the profile of benefits over theunemployment spell; (B) the replacement of the declining time sequence of insurance benefits by a constantsequence; (C) the reform B combined with the imposition of punitive sanctions; (D) a 3 months increase in themaximum duration of UI entitlement.

Pages: 35
Date: 2005
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