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Title: Information Deficiencies and Search Unemployment
Resulting in 1 citation.
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Mellow, Wesley |
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Information Deficiencies and Search Unemployment Working Paper No. 64, Bureau of Labor Statistics, U.S. Department of Labor, 1976 Cohort(s): Older Men Publisher: U.S. Department of Labor Keyword(s): Job Search; Unemployment; Veterans; Wages, Reservation This paper tests the hypothesis that information deficiencies affect search unemployment by estimating a search unemployment model that explicitly incorporates a measure of initial information deficiencies. Results support the recent job search models, such as McCall's adaptive search model, which hypothesize adjustments in the reservation wage as initial information deficiencies are resolved. Specifically, it appears that information deficiencies affect search unemployment, that search unemployment is productive and that the market differentials of job changers narrow. All this indicates a familiar scenario. The initial perception of the wage distribution is dominated by the prior wage. As search progresses, information is accumulated and in Bayesian fashion the perception of the wage distribution becomes more precise. The reservation wage is adjusted towards the market wage. Unemployment is thus productive in two important ways: (1) it is productive search: it leads to a better (higher wage) new job; and (2) it facilitates equilibration in the labor market: it encourages a realignment of unrealistic perceptions with market realities. Of course, these generalizations must be tempered by a recognition that the results apply only to the behavior of middle aged men in a full employment economy. |
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Bibliography Citation
Mellow, Wesley. "Information Deficiencies and Search Unemployment." Working Paper No. 64, Bureau of Labor Statistics, U.S. Department of Labor, 1976. |