Abstract:
This paper assesses whether a parsimonious partial equilibrium job search model with on-the-job
search can reproduce observed job durations and transitions to other jobs and to nonemployment.
We allow for unobserved heterogeneity across individuals in key structural parameters. Observed
heterogeneity and life cycle effects are accounted for by estimating separate models for flow
samples of labor market entrants and stock samples of “mature” workers with 10-11 years of
experience, by stratifying on education length and by allowing for non-search related wage growth
due to accumulation of labor market experience. We use comparable register based panel data for
two countries, Denmark and Norway. All workers are followed for 6 years. The model fits observed
job-to-job and job-to-nonemployment hazard functions well for most samples with a better fit for
entrants than for mature workers, especially for the job-to-job hazard function. We find important
differences in structural parameters between entrants and mature workers and we find that the
Norwegian labor market is more frictional than the Danish labor market.
Keywords: Job Mobility, Job Durations
JEL classification: J31, J63This paper has received financial support from the
Norwegian Research Council (grants 156032 and 156110