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Labor market prospects, search intensity and the transition from college to work

Author: Bas van der Klaauw, And Aico van Vuuren, And Peter Berkhout, And

Published in: European Economic Review 2010, vol. 54, no. 2, pp. 294-316

Summary of Working paper 2005:9

In this paper we develop a structural model for job search behavior of stu-
dents entering the labor market. The model includes endogenous search
e®ort and on the job search. Since students usually do not start a regular
job before graduation but start job search earlier, our model is non station-
ary. The model explains the common ¯nding that a substantial share of
individuals starts working immediately upon graduation. We estimate the
model using a unique data set of individuals who completed undergradu-
ate education in the Netherlands between 1995 and 2001. Our estimation
results show that a 1 percentage point decrease in unemployment rate in-
creases wage o®ers on average with 3 percent and that there are substantial
returns to work experience. Employment rates at graduation could be in-
creased from 40 percent to 65 percent if all students start job search 6
months prior to graduation.

In this paper we develop a structural model for job search behavior of students entering the labor market. The model includes endogenous search effort and on the job search. Since students usually do not start a regular job before graduation but start job search earlier, our model is non stationary. The model explains the common finding that a substantial share of individuals starts working immediately upon graduation. We estimate the model using a unique data set of individuals who completed undergraduate education in the Netherlands between 1995 and 2001. Our estimation results show that a 1 percentage point decrease in unemployment rate increases wage offers on average with 3 percent and that there are substantial returns to work experience. Employment rates at graduation could be increased from 40 percent to 65 percent if all students start job search 6 months prior to graduation.

Keywords: business cycle, structural estimation, return to work experience, job applications.

Research areas