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On the reservation wage under CARA and limited borrowing

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  • Bauer, Christian

Abstract

An individual's optimal behavior in a continuous-time sequential job search model with savings and CARA preferences is characterized analytically. I isolate the effects of limited borrowing and nonnegative consumption as well as risk aversion on the reservation wage by using a system of ordinary differential equations.

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Bibliographic Info

Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 62 (2011)
Issue (Month): 2 (September)
Pages: 126-129

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Handle: RePEc:eee:matsoc:v:62:y:2011:i:2:p:126-129

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Web page: http://www.elsevier.com/locate/inca/505565

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  1. Robert Shimer & Ivan Werning, 2008. "Liquidity and Insurance for the Unemployed," American Economic Review, American Economic Association, vol. 98(5), pages 1922-42, December.
  2. R. C. Merton, 1970. "Optimum Consumption and Portfolio Rules in a Continuous-time Model," Working papers 58, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Bloemen, H.G. & Stancanelli, E.G.F., 1997. "Individual Wealth, Reservation Wages and Transitions into Employment," Discussion Paper 1997-02, Tilburg University, Center for Economic Research.
  4. Silvio Rendón, 2002. "Job Search And Asset Accumulation Under Borrowing Constraints," Economics Working Papers we025219, Universidad Carlos III, Departamento de Economía.
  5. Stancanelli, Elena G F, 1999. " Do the Rich Stay Unemployed Longer? An Empirical Study for the UK," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(3), pages 295-314, August.
  6. James X. Sullivan, 2005. "Borrowing during unemployment: unsecured debt as a safety net," Proceedings 958, Federal Reserve Bank of Chicago.
  7. Yann Algan & Arnaud Cheron & Jean-Olivier Hairault & Francois Langot, 2003. "Wealth Effect on Labor Market Transitions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 156-178, January.
  8. Hans G. Bloemen & Elena G. F. Stancanelli, 2005. "Financial Wealth, Consumption Smoothing and Income Shocks Arising from Job Loss," Economica, London School of Economics and Political Science, vol. 72(3), pages 431-452, 08.
  9. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
  10. Raj Chetty, 2008. "Erratum: Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1197-1197, December.
  11. Martin Browning & Thomas Crossley, . "Unemployment Insurance Benefit Levels and Consumption Changes," Canadian International Labour Network Working Papers 25, McMaster University.
  12. Sennewald, Ken, 2007. "Controlled stochastic differential equations under Poisson uncertainty and with unbounded utility," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1106-1131, April.
  13. Robert Shimer & Iván Werning, 2007. "Reservation Wages and Unemployment Insurance," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1145-1185, 08.
  14. Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-57, August.
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