Abstract

The existing literature on empirical job search models concentrates on studying the effects of unemployment insurance (UI) benefits, and the primary interest has been in male displaced workers. It is usually assumed that displaced workers start to search for new jobs immediately after the separation, treating the labor force participation decision of the displaced workers as an exogenous issue. This thesis proposes a job search model where the participation decision of the displaced workers is made endogenous. The introduction of participation data enables us to identify more parameters and to avoid potential selection bias in the empirical work. The model is applied to study how the presence of young children affects the reservation wage and the escape rate from unemployment of female workers, and the gender wage gap between male and female workers. By its empirical work, the thesis tries to broaden the range of application of the job search theory. The empirical results of the thesis are based on a panel of young Canadians two suffered a permanent job displacement. It is found that the offer arrival rate is the primary channel through which child status may affect the reservation wage of female workers, while child care cost differentials between the states of employment and unemployment may play only a minor role. It is also found that the effects of child status on male workers are much smaller than that on female workers with respect to the reservation wage, the offer arrival rate and the escape rate from unemployment. This suggests that the presence of young children in a worker's family contributes an important part to the gender wage gap.