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Testing for optimality in job search models

Koop, G.M. and Poirier, D. (2002) Testing for optimality in job search models. Econometrics Journal, 4 (2). pp. 257-272. ISSN 1368-4221

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Abstract

Models of search in labor markets are potentially of great use for policy analysis since their parameters are structural. However, a common feature of these models is that an assumption of optimal behavior on the part of agents is necessary to achieve identification. From a classical econometric perspective, this means the assumption of optimality is untestable and, if optimality is not imposed, it is impossible to learn about the unidentified parameters. This paper argues that Bayesian methods can overcome both of these problems. In particular, we discuss testing optimality in stationary job search models with reservation wages. Learning about economically meaningful quantities such as the discount rate and risk aversion, not identified by the data alone, is considered.

Item type: Article
ID code: 6944
Keywords: bayesian, reservation wage, SIR, posterior simulation, statistics, employment, econometrics, Probabilities. Mathematical statistics, Economic Theory
Subjects: Science > Mathematics > Probabilities. Mathematical statistics
Social Sciences > Economic Theory
Department: Strathclyde Business School > Economics
Related URLs:
    Depositing user: Strathprints Administrator
    Date Deposited: 03 Oct 2008
    Last modified: 12 Mar 2012 10:46
    URI: http://strathprints.strath.ac.uk/id/eprint/6944

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