Job Search and Job Finding in a Period of Mass Unemployment: - - PowerPoint PPT Presentation

Job Search and Job Finding in a Period of Mass Unemployment: Evidence from High-Frequency Longitudinal Data

by Alan Krueger and Andreas Mueller Discussion by Bob Hall NBER EF&G Meeting, New York Fed, February 4, 2011 ·

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Search effort

Factor Relation to search effort Finding

Sorting High effort searchers find jobs more quickly, leaving the low effort ones Appears to be the opposite, but measurement problems may be the reason Prior information Searchers find out about available jobs fairly easily at the outset of search and then spend time waiting for prospects to materialize Strongly supported Learning Searchers reduce effort after early results are unfavorable Appears to be strongly supported, but measurement problems may be the reason Wealth As wealth is depleted, search becomes more intense Appears to be strongly rejected but, measurement problems may be the reason Unemployment insurance Once benefits are exhausted, search becomes more intensive. Not considered

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Reservation wage

Factor Relation to reservation wage Finding

Sorting Low reservation wage searchers depart unemployment soon, leaving high reservation wage searchers. Rejected Prior information Wages are known at the outset, so there is no decline during unemployment Strongly supported Learning Searchers cut reservation wages after learning that higher-wage jobs are not available. Rejected Wealth As wealth is depleted, reservation wages decline Rejected Unemployment insurance Benefits: Once exhausted, reservation wage declines. Not discussed but implicitly supported

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Old finding, confirmed here

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Two measures of search time

Time diary for the day before the survey: 7.6 hours per week

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Two measures of search time

Time diary for the day before the survey: 7.6 hours per week Recall question for the week: 11.5 hours per week ·

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Minutes per day of search

43 Figure 3.1a: Time spent on job search (yesterday), in minutes per day

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Related finding in the CPS

Bailar JASA, 1975

24 Journal

• f the

American Statistical Association, March 1975

• 1. Rotation

Group Indices in the CPS for Two Periods, 1968-69 (T1) and 1970-72 (T2), for Selected Characteristics

Monthly Std. Characteristic Month in sample avg. error

• f

Characteristic

~~~~~~~~~~~~~~~~~~~~~class

size index 1 2 3 4 5 6 7 8 (000) Total population 16 and over Civilian labor force Ti 102.3 100.3 99.8 99.5 100.8 99.3 99.1 99.0 80,340 0.3 T2 101.6 100.0 99.6 100.3 100.0 99.1 99.2 100.0 84,654 0.2 Employed Ti 101.6 100.2 99.9 99.8 100.4 99.4 99.4 99.3 77,285 0.3 T2 101.1 100.0 99.7 100.3 99.9 99.4 99.5 100.1 79,913 0.2 Unemployed Ti 120.0 101.5 96.4 92.8 109.3 96.5 92.6 91.0 3,055 2.4 T2 109.2 100.3 98.1 101.2 102.3 96.7 94.1 98.2 4,741 1.2 Hours worked per week 1-29 Ti 105.3 100.9 100.8 98.9 101.3 98.2 97.5 96.7 21,466 0.3 T2 103.9 101.1 99.8 100.1 100.7 98.4 97.3 98.7 35,560 0.2 30-34 Ti 101.1 101.0 99.1 100.0 98.2 100.1 100.1 100.6 8,894 0.8 T2 100.6 100.8 100.7 100.7 98.7 98.5 100.4 99.7 15,829 0.4 35-40 Ti 92.9 97.9 100.1 101.7 98.7 101.9 103.0 103.8 65,369 0.4 T2 93.1 97.7 99.9 101.5 99.2 101.7 103.1 103.9 103,797 0.2 41 or more Ti 113.0 103.5 99.3 96.8 102.6 96.2 94.9 93.6 42,972 0.2 T2 110.8 100.6 96.9 94.9 99.7 94.4 88.7 91.7 62,288 0.1 Males 16 and over Employed Ti 100.9 100.0 100.0 99.8 100.2 99.8 99.7 99.7 48,589 0.3 T2 100.7 99.9 99.8 100.2 99.9 99.7 99.7 100.2 49,637 0.2 Unemployed Ti 114.1 102.6 98.0 95.6 106.0 97.7 93.4 92.6 1,490 3.5 T2 105.4 101.4 99.9 101.6 100.3 98.0 95.6 97.9 2,578 1.6 Females 16 and over Civilian labor force TI 104.0 100.6 99.5 99.2 101.4 98.7 98.4 98.1 30,261 0.6 T2 102.7 100.0 99.4 100.4 100.2 98.6 98.6 100.0 32,439 0.5 Unemployed Ti 125.5 100.2 94.6 90.5 112.5 95.1 9.1.8 89.5 1,564 2.8 T2 113.8 99.0 95.9 100.7 104.4 95.2 92.2 98.6 2,163 1.5

estimate

• f

the number

• f

unemployed 20 percent higher than the average for all rotation groups; the rotation group in sample for the last time gives an estimate

• f

the number

• f

unemployed nine percent below the average. These estimates are very different and have different expected values. The indices are shown for two time periods separately because of a change in procedure starting in 1970. As a result

• f

the Gordon Committee Report [10] in 1962, it was decided to collect more information

• n those re-

ported as not in the labor force. The questions were first included

• n

the CPS questionnaire in 1967. The first time period shown in Table 1 is the two-year period 1968-69 when additional questions were asked

• f

persons classified as not in the labor force and who were in sample for the first

• r fifth
• times. (The questions are shown in the

exhibit as Questions 24A-E.) It was hypothesized that this procedure might account for a part of the rotation group bias on unemployment items because the inter- viewers might sometimes use the answers to these questions to reclassify these persons as in the labor force. Therefore, in 1970 it was decided to ask these questions

• f

persons in sample for the fourth and eighth times. The second time period shown in Table 1 is the three-year period 1970-72. Changing the interview time at which these additional questions were asked did, in fact, reduce the indices for the rotation groups in sample for the first and fifth times and increase the indices for the rotation groups in sample for the fourth and eighth times. For the period 1970-72, the index for unemployment for the first month has been reduced to 109 and for the eighth month has been increased to 98. We conclude that the interview at which additional questions are asked

• f

persons not in the labor force causes some of the difference in the estimates

• f the number
• f unemployed.

The rotation group indices for unemployment are now more compar- able with those

• f

earlier times. The differences among estimates for the different rotation groups shown in Table 1 cannot be accounted for by sampling error; hence a rotation group bias must exist in the reporting, at least for some items. Another conclusion than can be drawn from the results in Table 1 is that the asking

• f

probing questions

• f

people not in the labor force changes the classification

• f some

persons and hence causes a difference in the number

• f

persons classified in certain categories.

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Regressions of search time on unemployment duration

Table 3.1a Linear regressions of time spent on job search (yesterday), with and without fixed effects Dependent varialbe: time spent on job search, in mins. per day Week 1 Pooled cross- section Fixed effects Fixed effects Unemployment duration, in weeks 0.227

• 0.075
• 2.73
• 1.62

(0.104)** (0.072) (0.250)*** (0.313)*** Lapse (before November 8)

• 0.937

led

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Marginal probit coefficients for probability of early UI exit

Left UI early (before March 14, 2010) Explanatory Variables: (1) (2) (3) Time spent on job search, in hours per week 0.0018 0.0018 0.0017

(0.0006)*** (0.0005)*** (0.0005)***

Log(reservation wage ratio)

• 0.0492
• 0.0485
• 0.0517

ly resp

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Identification

Search productivity: hi = αi + si

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Identification

Search productivity: hi = αi + si Exit benefit: hi − 1 2h2

i

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Identification

Search productivity: hi = αi + si Exit benefit: hi − 1 2h2

i

Search time cost: γisi + 1 2s2

i

·

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Identification, continued

max

si

αi + si − 1 2(αi + si)2 − γisi − 1 2s2

i

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Identification, continued

max

si

αi + si − 1 2(αi + si)2 − γisi − 1 2s2

i

FONC: 1 − hi − γi − si = 0 ·

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Two-equation system

Search productivity: hi = αi + si

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Two-equation system

Search productivity: hi = αi + si Optimal time allocation to search: hi = 1 − γi − si ·

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Two dimensions of heterogeneity

3 5 4

High productivity

3 3.5

High productivity

2.5

rd

Low productivity

2

Exit haza

1 1.5

Low search time cost

0.5

High search time cost

0.5 1 1.5 2 2.5 3

Search time cost

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What the econometrician sees

3 5 4 3 3.5 2.5

rd

2

Exit haza

1 1.5 0.5 0.5 1 1.5 2 2.5 3

Search time

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Wage-setting typology from Hall-Krueger

Commitment to ignore counteroffers Wage offer customized to worker Interruption to alternating offer bargaining likely? Commitment to ignore counteroffers Wage offer customized to worker Diamond paradox Posted wage Wage tightly linked to conditions Wage less responsive to conditions Interruption to alternating offer bargaining likely?

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Reservation wage and unemployment duration

All durations Less than 5 weeks 5 - 9 weeks 10 - 14 weeks 15 - 19 weeks 20 - 24 weeks 25 - 49 weeks 50 + weeks Feldstein & Poterba (1984): All Job Losers and Leavers 1.07 1.11 1.09 1.04 1.06 1.04 1.02 0.99 Feldstein & Poterba (1984): Job Losers 1.03 1.06 1.05 1.03 1.06 1.00 0.99 0.97 Krueger & Mueller: Cross-section (1st week) 0.99 1.04 1.02 1.01 1.00 1.06 0.95 0.94 Krueger & Mueller: Longitudinal estimate 0.99 1.00 1.00 1.00 0.99 0.99 0.98 0.97 Note: Survey weights are used. Universe: Unemployed; no job offer yet accepted; age 20-65. 17

Probability of acceptance when there is a threshold at W = R

0.9 1.0 0 7 0.8

ty

0.6 0.7

probabili

0.4 0.5

eptance p

0.2 0.3

Acce

0.0 0.1 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4

Ratio of wage offer to reservation wage

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W ≥ R matters

Hourly offered wage < hourly reservation wage Hourly offered wage >= hourly reservation wage Accepted 44.4% 73.8% Not accepted 24.2% 11.4% Undecided 31.4% 14.8% N 361 417

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W ≥ R matters somewhere near 0

Hourly offered wage ≥ Hourly reservation wage (lagged) 0.212 0.196 0.206

(0.098)** (0.061)*** (0.095)**

≥ ≥

)

≥

) * * * * * * ) 20

Discontinuity in probit coefficient

W ≥ 21

Offers are rare

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And most are accepted

61 percent

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And most are accepted

61 percent Hardly any job-seekers see more than one offer

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And most are accepted

61 percent Hardly any job-seekers see more than one offer This puts a lot of tension on job-seekers’ beliefs about the

• ffer distribution—they don’t learn much about the

distribution while searching

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And most are accepted

61 percent Hardly any job-seekers see more than one offer This puts a lot of tension on job-seekers’ beliefs about the

• ffer distribution—they don’t learn much about the

distribution while searching One-armed bandit model not relevant ·

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Search effort

Factor Relation to search effort Finding

Sorting High effort searchers find jobs more quickly, leaving the low effort ones Appears to be the opposite, but measurement problems may be the reason Prior information Searchers find out about available jobs fairly easily at the outset of search and then spend time waiting for prospects to materialize Strongly supported Learning Searchers reduce effort after early results are unfavorable Appears to be strongly supported, but measurement problems may be the reason Wealth As wealth is depleted, search becomes more intense Appears to be strongly rejected but, measurement problems may be the reason Unemployment insurance Once benefits are exhausted, search becomes more intensive. Not considered

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Reservation wage

Factor Relation to reservation wage Finding

Sorting Low reservation wage searchers depart unemployment soon, leaving high reservation wage searchers. Rejected Prior information Wages are known at the outset, so there is no decline during unemployment Strongly supported Learning Searchers cut reservation wages after learning that higher-wage jobs are not available. Rejected Wealth As wealth is depleted, reservation wages decline Rejected Unemployment insurance Benefits: Once exhausted, reservation wage declines. Not discussed but implicitly supported

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