Econometrica: Jul, 1981, Volume 49, Issue 4

Individual Effects in a Nonlinear Model: Explicit Treatment of Heterogeneity in the Empirical Job-Search Model

https://doi.org/0012-9682(198107)49:4<965:IEIANM>2.0.CO;2-J
p. 965-979

George R. Neumann, Nicholas M. Kiefer

This paper extends the empirical version of a job-search model to permit heterogeneity in the location of wage offer distributions. Population variance in wage offers is decomposed into variance due to heterogeneity and variance facing each individual. Heterogeneity is found to be an important source of offer variance in the population. The amount of "pure wage offer dispersion" facing individuals is found to contribute little to population variance.