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Author: Lan, Ke-Jeng
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Lan, Ke-Jeng |
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Inflation Effects on the Labor Market: A Transition Rate Model Ph.D. Dissertation, The Ohio State University, 1989 Cohort(s): NLSY79 Publisher: UMI - University Microfilms, Bell and Howell Information and Learning Keyword(s): Inflation; Job Search; Labor Turnover; Transition Rates, Activity to Work; Wages, Reservation The impact of inflation, particularly unexpected inflation, on the operation of the labor market remains an important and empirically unresolved issue. Earlier work, largely based on time series analysis of industry aggregate quit data, found little impact of inflation on that critical labor market mechanism. This earlier work has been criticized for not adequately distinguishing between expected and unexpected inflation. At the same time, longitudinal micro data sets of high quality have become available, permitting the estimation of more complete transition models that incorporate job acceptance by workers who are not employed as well as job termination by employed workers. This dissertation analyzes empirically the impact of unexpected and expected inflation of these labor market transitions. In a two-state (employment, unemployment) search model, the reservation approach is utilized in analyzing the male sub-sample of the 1979 NLSY over the period 1980 to 1983. The wage information is corrected for selectivity bias by a two-stage estimation method, and reservation wages are then derived. A maximum-likelihood technique is used with the structural transition model to estimate the parameters of the true wage offer distribution. Implied transition rates are then calculated. The impact of unexpected inflation on transition rates appears through its influence on the real reservation wage. Confirming the results of earlier works, the empirical results indicate that the impact of "unexpected" inflation on transition rates is insignificant because the impact of unexpected inflation on the intervening reservation wage is not significant. Hence, trying to "fool" youths by unexpected inflationary policies in order to reduce their unemployment rate is unlikely to be successful. |
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Bibliography Citation
Lan, Ke-Jeng. Inflation Effects on the Labor Market: A Transition Rate Model. Ph.D. Dissertation, The Ohio State University, 1989. |