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 · 1

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Search effort Factor Relation to search effort Finding Appears to be the opposite, but High effort searchers find jobs more Sorting measurement problems may be the quickly, leaving the low effort ones reason Searchers find out about available jobs fairly easily at the outset of search and Prior information Strongly supported then spend time waiting for prospects to materialize Appears to be strongly supported, but Searchers reduce effort after early results Learning measurement problems may be the are unfavorable reason Appears to be strongly rejected but, As wealth is depleted, search becomes Wealth measurement problems may be the more intense reason Unemployment Once benefits are exhausted, search Not considered insurance becomes more intensive. 3

Reservation wage Factor Relation to reservation wage Finding Low reservation wage searchers depart unemployment soon, leaving high Rejected Sorting reservation wage searchers. Prior Wages are known at the outset, so there Strongly supported information is no decline during unemployment Searchers cut reservation wages after Learning learning that higher-wage jobs are not Rejected available. As wealth is depleted, reservation wages Wealth Rejected decline Unemployment Benefits: Once exhausted, reservation Not discussed but implicitly supported insurance wage declines. 4

Old finding, confirmed here 5 42

Two measures of search time Time diary for the day before the survey: 7.6 hours per week 6

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 · 6

Minutes per day of search Figure 3.1a: Time spent on job search (yesterday), in minutes per day 7 43

Related finding in the CPS Bailar JASA , 1975 24 Journal of 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. Month in sample avg. of Characteristic error 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 103.9 101.1 100.1 100.7 98.4 97.3 98.7 99.8 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 0.4 103.8 65,369 T2 93.1 97.7 99.9 101.5 99.2 101.7 103.1 103.9 103,797 0.2 8 41 or more Ti 113.0 103.5 99.3 96.8 102.6 96.2 94.9 0.2 93.6 42,972 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 of the number of unemployed 20 percent higher second time period shown in Table 1 is the three-year than the average for all rotation groups; the rotation period 1970-72. Changing the interview time at which group in sample for the last time gives an estimate of the these additional questions were asked did, in fact, reduce number of unemployed nine percent below the average. the indices for the rotation groups in sample for the first These estimates are very different and have different and fifth times and increase the indices for the rotation For the expected values. groups in sample for the fourth and eighth times. The indices are shown for two time periods separately period 1970-72, the index for unemployment for the first because of a change in procedure in 1970. As a been reduced to 109 and for the eighth month starting month has result of the Gordon Committee Report [10] in 1962, it has been increased to 98. We conclude that the interview was decided to collect more information on those re- at which additional questions are asked of persons not in in the ported as not in the labor force. The questions were first the labor force causes some of the difference included on the CPS questionnaire in 1967. The first time estimates of the number of unemployed. The rotation in Table 1 is the group indices for unemployment are now more compar- period shown two-year period 1968-69 when additional questions were asked of persons classified able with those of earlier times. as not in the labor force and who in among estimates for the different were sample for the The differences first or fifth times. (The questions are shown in the rotation groups shown in Table 1 cannot be accounted for exhibit as Questions 24A-E.) It was hypothesized that error; hence a rotation group bias must by sampling this procedure might account for a part of the rotation exist in the reporting, at least for some items. Another group bias on unemployment items because the inter- conclusion than can be drawn from the results in Table viewers might sometimes use the answers to these 1 is that the asking of probing questions of people not questions to reclassify these persons as in the labor force. in the labor force changes the classification of some Therefore, in 1970 it of was decided to ask these questions persons and hence causes a difference in the number of persons in sample for the fourth and eighth times. The persons classified in certain categories.

Regressions of search time on unemployment duration Table 3.1a Linear regressions of time spent on job search (yesterday), with and without fixed effects Pooled Dependent varialbe: Fixed Fixed Week 1 cross- time spent on job search, in mins. per day effects effects section 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 9 led

Marginal probit coefficients for probability of early UI exit Left UI early (before March 14, 2010) (1) (2) (3) Explanatory Variables: 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 10 ly resp

Identification Search productivity: h i = α i + s i 11

Identification Search productivity: h i = α i + s i Exit benefit: h i − 1 2 h 2 i 11

Identification Search productivity: h i = α i + s i Exit benefit: h i − 1 2 h 2 i Search time cost: γ i s i + 1 2 s 2 i · 11

Identification, continued α i + s i − 1 2( α i + s i ) 2 − γ i s i − 1 2 s 2 max i s i 12

Identification, continued α i + s i − 1 2( α i + s i ) 2 − γ i s i − 1 2 s 2 max i s i FONC: 1 − h i − γ i − s i = 0 · 12

Two-equation system Search productivity: h i = α i + s i 13

Two-equation system Search productivity: h i = α i + s i Optimal time allocation to search: h i = 1 − γ i − s i · 13

Two dimensions of heterogeneity 4 High productivity High productivity 3.5 3 5 3 Low productivity 2.5 rd Exit haza 2 1.5 Low search time cost 1 High search time 0.5 cost cost 0 0 0.5 1 Search time 1.5 2 2.5 3 14

What the econometrician sees 4 3 5 3.5 3 2.5 rd Exit haza 2 1.5 1 0.5 0 0 0.5 1 Search time 1.5 2 2.5 3 15

Wage-setting typology from Hall-Krueger Commitment Commitment to ignore to ignore counteroffers counteroffers Wage offer Wage offer Interruption to Interruption to customized to customized to alternating offer alternating offer worker worker bargaining bargaining likely? likely? Wage less Wage Posted responsive Diamond tightly to paradox wage linked to conditions conditions 16