Choices Once in a firm individuals make a choice to change jobs or not when they receive an alternative offer Job arrival rate for the employed Given the shock to the match specific effect individuals may choose to move to unemployment They can only choose to go back to work if they gent an offer [job arrival rate for the unemployed Transitions to unemployment can also take place because of job destruction. Job Destruction Rate
Choices • Once in a firm individuals make a choice to change jobs or not when they receive an alternative offer. [Job arrival Rate for the employed] • Given the shock to the match specific effect individuals may choose to move to unemployment. • They can only choose to go back to work if they gent an offer [Job arrival Rate for the unemployed] • Transitions to unemployment can also take place because of job destruction. [Job Destruction Rate]
The Source of Dynamics Education choices now affect job opportunities in the future The returns to experience and tenure The potential difference in the job arrival rates for the employed and the unemployed The stochastic structure
The Source of Dynamics • Education choices now affect job opportunities in the future • The returns to experience and tenure • The potential difference in the job arrival rates for the employed and the unemployed. • The stochastic structure
The environment and sources of uncertainty We consider a stationary economy There are aggregate shocks to productivity a random cost of education(how hard you find it to learn) Random arrival of job offers The match specific effect on wages Match specific effects evolve as a random walk In every period a job may be destroyed exogenously
The environment and sources of uncertainty • We consider a stationary economy • There are aggregate shocks to productivity. • A random cost of education (how hard you find it to learn) • Random arrival of job offers. • The match specific effect on wages • Match specific effects evolve as a random walk • In every period a job may be destroyed exogenously
The wage equation ages lnwa)=d01,E12尽四们2Ed12尽 All parameters depend on apprenticeship status Ability is denoted by ; This affects levels of wages, returns to apprenticeship status(Edi), experience and tenure The match specific heterogeneity is denoted by Kift
The wage equation • Wages • All parameters depend on apprenticeship status. • Ability is denoted by i . This affects levels of wages, returns to apprenticeship status (Edi ), experience and tenure. • The match specific heterogeneity is denoted by ift lnwift ☺0i☺EdiEdi ☺XXi ,Edi ,i☺TTi ,Edi ,i ☺GEdiGt ift #
a description of the statistical approach The model consists of a set of value functions-bellman equations There is a value for going into education, working in the current job Switching to a new job if an offer is available Not working These value functions define the probabilities of observed eⅴents The probabilities of all transitions we observe and the density for observed wages constitute the likelihood function sKip
A description of the statistical approach • The model consists of a set of value functions – Bellman equations. • There is a value for: – going into education, – working in the current job – Switching to a new job if an offer is available – Not working • These value functions define the probabilities of observed events • The probabilities of all transitions we observe and the density for observed wages constitute the likelihood function SKIP