English, Article, Journal or magazine article edition: Unobservable Heterogeneity in Directed Search Peters, Michael

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Unobservable Heterogeneity in Directed Search
Author
  • Peters, Michael
Physical Description
  • preprint
Notes
  • This paper studies a simple directed search model where workers have private information about their own productivity. Their productivity is observable to firms once workers apply but not verifiable so that it cannot be directly rewarded by firms in the form of higher wages. This unobservable heterogeneity among workers provides a very natural way of modeling application decisions. More important, this approach breaks the tight connection between the wage and unemployment duration that appears to constitute a weakness of the directed search approach. In a particular, using the reciprocal of the employment probability as a proxy for average duration of unemployment, the model predicts an inverse relationship between the wage at which a worker leaves unemployment and the average duration of unemployment. This prediction is consistent with existing empirical work on the topic, but differs from previous models of directed search.
  • wage setting, directed search, mixed equilibrium
  • RePEc:ubc:pmicro:peters-05-06-13-01-50-30
Language
  • English
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