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Wealth Effect on Labor Market Transitions

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Author Info
Yann Algan (Universite de Paris I)
Arnaud Cheron (Universite du Maine, CEPREMAP)
Jean-Olivier Hairault (Universite de Paris I, CEPREMAP)
Francois Langot (University du Maine, CEPREMAP)

Additional information is available for the following registered author(s):

Abstract

Does wealth matter for labor market transitions? This paper aims at giving a quantitative answer to this question. Econometric reduced-form estimates on French panel data provide evidence of a significant wealth effect on the extensive margin of labor supply. Both unemployment duration and job quits rise with holdings of short-term liquid assets. This evidence gives support to the recent development of quantitative dynamic equilibrium search models incorporating precautionary savings. We consider such a model calibrated on French data and focus on the role of the option value of search and the disutility of working. In addition, we pay attention to the important interaction between the intensive and the extensive margins of labor supply. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/S1094-2025(02)00013-3
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Publisher Info
Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 6 (2003)
Issue (Month): 1 (January)
Pages: 156-178
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Handle: RePEc:red:issued:v:6:y:2003:i:1:p:156-178

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Related research
Keywords: Labor market transitions; Panel data; Job search theory; Incomplete markets; Savings;

Other versions of this item:

Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July. [Downloadable!] (restricted)
    Other versions:
  2. Bird, Edward J & Hagstrom, Paul A, 1999. "The Wealth Effects of Income Insurance," Review of Income and Wealth, Blackwell Publishing, vol. 45(3), pages 339-52, September.
  3. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Dynarski, Mark & Sheffrin, Steven M, 1987. "Consumption and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 411-28, May. [Downloadable!] (restricted)
  5. Jovanovic, Boyan, 1987. "Work, Rest, and Search: Unemployment, Turnover, and the Cycle," Journal of Labor Economics, University of Chicago Press, vol. 5(2), pages 131-48, April. [Downloadable!] (restricted)
  6. Hernaes, E. & Strom, S., 1995. "Heterogeneity and Unemployment Duration," Memorandum 28/1995, Oslo University, Department of Economics.
  7. Stephen P. Jenkins, 1998. "Discrete time proportional hazards regression," Stata Technical Bulletin, StataCorp LP, vol. 7(39). [Downloadable!]
  8. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October. [Downloadable!] (restricted)
    Other versions:
  9. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February. [Downloadable!] (restricted)
  10. B. Dormont & D. Fougère & A. Prieto, 2001. "L'effet de l'allocation unique dégressive sur la reprise d'emploi," THEMA Working Papers 2001-05, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise. [Downloadable!]
  11. Mortensen, Dale T & Pissarides, Christopher, 1999. "New Developments in Models of Search in the Labour Market," CEPR Discussion Papers 2053, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Dale Mortensen, 1984. "Job Search and Labor Market Analysis," Discussion Papers 594, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  13. Aiyagari, S Rao, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 659-84, August. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rasmus Lentz, 2009. "Optimal Unemployment Insurance in an Estimated Job Search Model with Savings," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 37-57, January. [Downloadable!] (restricted)
    Other versions:
  2. Yu-chin Chen & Stephen J. Turnovsky, 2008. "Growth and Inequality Tradeoffs in a Small Open Economy," Working Papers UWEC-2009-05, University of Washington, Department of Economics. [Downloadable!]
  3. Silvio Rendon, 2002. "Job Search and Asset Accumulation under Borrowing Constraints," Economics Working Papers 649, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  4. Stephen J. Turnovsky & Cecilia Garcia-Pe–alosa, 2006. "The Dynamics of Wealth and Income Distribution in a Neoclassical Growth Model," IDEP Working Papers 0604, Institut d'economie publique (IDEP), Marseille, France, revised Jul 2006. [Downloadable!]
    Other versions:
  5. Rasmus Lentz & Torben Tranæs, 2005. "Marriage, Wealth, and Unemployment Duration: A Gender Asymmetry Puzzle," IZA Discussion Papers 1607, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Manoj Atolia & Santanu Chatterjee & Stephen J. Turnovsky, 2009. "Growth and Inequality: Dependence of the Time Path of Productivity Increases (and other Structural Changes)," Working Papers wp2009_01_02, Department of Economics, Florida State University. [Downloadable!]
  7. Rasmus Lentz & Torben Tranæs, 2002. "Job Search and Savings: Wealth Effects and Duration Dependence," CAM Working Papers 2004-11, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics, revised Nov 2003. [Downloadable!]
    Other versions:
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