Empirical Labor Search: A Survey

This paper surveys the existing empirical research that uses search theory to empirically analyze labor supply questions in a structural framework, using data on individual labor market transitions and du-rations, wages, and individual characteristics. The starting points of the literature are the Mincerian earnings function, Heckmans clas-sic selection model, and dynamic optimization theory. We develop a general framework for the labor market where the search for a job involves dynamic decision making under uncertainty. It can be spe-cialized to be in agreement with most published research using labor search models. We discuss estimation, policy evaluation with the es-timated model, equilibrium model versions, and the decomposition of wage variation into factors due to heterogeneity of various model de-terminants as well as search frictions themselves. We summarize the main empirical conclusions.