Flashcards
Job Search
Cards in this deck (20)
- 1What does the Beveridge curve display?The relationship between vacancies and unemployment
- 2What is the purpose of job search theory?To study the behaviour of induviduals with imperfect information about jobs and wages
- 3What is meant by the theory being dynamic?Can make predictions about the length of time an individual is unemployed
- 4How is the job search model constructed?The static labour supply model and the dynamic search model can be thought of as complementary so can be superimposed onto the same graph
- 5What assumptions are made about the job search model?- Worker are identical
- Distribution of wage offers and workers don't know what firms are offering.
- Non-trivial search costs
- Benefit of continued search declines in wage offer - 6What is the optimal stopping rule?1 application at a time
Accept: w > wr
Reject: w < wr - 7What is the marginal cost of job search?The cost of refusing a job offer and searching for one period (direct cost and unemployment)
- 8What is the marginal benefit of job search?The probability of getting a better offer + expected wage offer given that the offer is greater than the one just turned down
- 9What is reservation wage?The wage where MC = MB
- 10What are the determinants of reservation wage?- Unemployment benefit level
- Cost of search
- Probability of success at interview
- Discount rate
- Position and shape of wage distribution - 11How does the benefit level effect the reservation wage?Reduces the OC of refusing which increases the reservation wage
MC curve shifts right - 12How does the discount rate effect the reservation wage?Search benefits are collected in the future
Higher discount rates result in lower future benefits
MB curve shifts left - 13How does the probability of a successful application effect the reservation wage?Increasing the probability of success increases the reservation wage
In a recession, probability decrease as there are more searchers but fewer vacanices
Reservation wage is pro-cyclical - 14How does the position/shape of the wage distribution effect the reservation wage?If the distribution shifts right there are more good jobs available so P(w > wr) increases resulting in an increased reservation wage. Ambiguous effect on search duration
Increasing variance increases reservation wage - 15What is the hazard rate of unemployment?The probability of finding a job in each period e.g. the rate at which people leave unemployment from 1 period to the next
- 16What do studies suggest about the relationship between unemployment duration and unemployment benefits?Small positive elasticity of unemployment benefits = people with higher benefits spend longer unemployed
Omitted variable issues with these studies - 17What is observed if unemployment benefit runs out at a certain point?Spike in unemployment hazard where benefits are withdrawn
Probaility of finding a new job increases but only by a small amount - 18What is duration dependence?Probability of being successful at interview decreases if unemployment used as a signal of bad quality
Decrease in hazard rate to employment over time
Chance of remaining unemployed for one more period depends on number of periods one is already in unemployment - 19Summarise a study on duration dependence What was found?Kroft et al. (2013)
Sent large number of fictious applications to real vacancies
Randomly varied duration of on-going unemployment spells
Found call-back rate is, on average, lower for ficticious candidates with longer unemployment spells
Effect is stronger in buoyant labour markets (sectors) that are thriving
Seem to interpret a long-term unemployment spell as a bad signal especially if plenty of jobs available - 20What occurs if on-the-job search is possible?No additional benefit from refusing an offer (MB = 0)
wr = b - c
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- Year 2 ECN21005 - Labour Economics Flashcards on Job Search, created by Imogen Donoghue on 27/01/2023.
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- Imogen Donoghue
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