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The second feature of the model we consider is the constant, exogenous job destruction rate.
Both features of the data are consistent with an exogenous job destruction rate in this context.
The probability of becoming a disability benefit claimant rises sharply in response to (exogenous) job loss.
We find two features of the model are consistent with the experimental results: endogenous search intensity and exogenous job destruction.
The first issue we consider is whether an exogenous job destruction rate is consistent with the experimental data.
The parameters calibrated in the first stage include the discount factor, search friction parameters, and exogenous job separation rates: parameters that are, in theory, invariant to changes in the Income Assistance program.
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We see this by the simultaneous increase of the unemployment rate and the private-sector employment rate in Fig. 4. Furthermore and in addition to a model with only exogenous (private) job destruction as in Stähler and Thomas (2012)—we see that private-sector job destruction increases (after a short drop on impact).
Ananat et al. (2011) use plant closings as an exogenous source of job loss, and Lyle (2006) uses military deployments and job assignments during the Gulf War to study the impact of parental absences and household relocations.
24 This wage increase was exogenous because factory job applicants were not told about the living wage when they were hired in December 2009, and they expected to be paid the usual minimum wage.
An important insight gained from this study is that the "exogenous" structure of available job opportunities is, besides widely discussed individual and social resources, crucial for IVET graduates' successful integration into occupational labour markets.
In the present setup with endogenous job destruction, we now have to determine the exogenous dismissal probability in the private sector, too.
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CEO of Professional Science Editing for Scientists @ prosciediting.com