Testing Search Theory with Reemployment Bonus Experiments: Cross-Validation of Results from New Jersey and Illinois
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This paper assesses the ability of a simple search—theoretic
model to explain the results of two controlled reemployment bonus
experiments. The availability of two independent experiments
with substantially different treatments allows for a rigorous
test of the model. Parameters of the model are estimated by
minimizing the distance between the observed and predicted
aggregate response in each experiment, then cross-validated using
the observed and predicted treatment response from the other
experiment. The model is unable to predict an effect as large as
that observed in one of the experiments. In addition, the model
cannot explain the degree of individual—specific wage variability
found in the data. The relative success of models with and
without variable search intensity is also considered, but the
statistical procedures cannot distinguish between them.
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Eastern Economic Journal, Vol 19, No. 2, Spring 1993
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Working Papers
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