Non-stationary job search when jobs are not forever: A structural estimation

This paper considers a job search model where the environment is not stationary along the unemployment spell and where jobs do not last forever. Under this circumstance, reservation wages can be lower than without separations, as in a stationary environment, but they can also be initially higher because of the non-stationarity of the model. Moreover, the time-dependence of reservation wages is stronger than with no separations. The model is estimated structurally using Spanish data for the period 1985-1996. The main finding is that, although the decrease in reservation wages is the main determinant of the change in the exit rate from unemployment for the first four months, later on the only effect comes from the job offer arrival rate, given that acceptance probabilities are roughly equal to one.