Job Search with Bayes Priors

Abstract

Preliminary and incomplete This paper estimates a version of the partial equilibrium structural job search model with the market wage distribution unknown to unemployed workers. Instead, workers have prior beliefs about it that they revise at the arrival of job offers according to Bayes learning rule. Using French data on unemployed people registered at the National Agency for Employment, the paper assesses the unemployed workers’ beliefs about the market wage distribution that they form at the beginning of the unemployment spell, as well as gives estimates of the labour market parameters (the market wage distribution and the offer arrival rate)